Article by Pamela Yip

Imagine that you’re a self-made person with $100 million in assets.

Do you leave it all to your children?

A coming inter-generational shift in wealth raises many issues for rich families, including how much to give children without doing more harm than good.

Financial advisers say the affluent families they deal with are most concerned with ensuring that their wealth doesn’t snuff out their children’s sense of purpose, ambition and desire to make the world a better place.

“Being a child of wealth shouldn’t be a burden,” said Robert Johnson, regional managing director at the Private Banking & Investment Group of Merrill Lynch in Dallas, “but sometimes it is.”

In a national study of 206 affluent parents in October, Merrill Lynch found that most people plan to leave the lion’s share of their wealth to family members, motivated by a desire to positively influence the lives of loved ones.

Given the amount of wealth that’s expected to be transferred to the next generation, more families will need to be discussing this.

“While the ‘Great Transfer’ (of wealth) from the Greatest Generation to the baby boomers is still taking place, a second and even larger wealth transfer from the boomers to their heirs is starting now and will continue over the next 30 to 40 years,” consulting firm Accenture said in a 2012 report.

“While the Great Transfer will see an over-$12 trillion shift, the ‘Greater’ wealth transfer is much larger, estimated at over $30 trillion in financial and nonfinancial assets in North America,” Accenture said.

So how much is too much to give your child?

There’s no magic number, but Merrill Lynch draws the line at “when the money creates a disincentive to achieve one’s full potential.”

“Too often, people think only about dollar amounts, not impact, when deciding how much is too much to give,” said Michael Liersch at Merrill Lynch Wealth Management. “There is no silver-bullet answer or one-size-fits-all approach to gifting assets. The process of meaningful, intentional giving, whether to family, friends or philanthropy, should be highly personalized. It requires honesty, humility and a willingness to face this all-important topic head-on.”

Bankers who work with the wealthy said they try to help families more clearly define what they want to pass on to their children.

“The first step in that is to really look at the overarching question of what do you want your legacy to be,” said Pete Chilian, managing director of the J.P. Morgan Private Bank in Dallas. “Perhaps the most challenging part in that is how much to give away during your life.”

Many wealth advisers also offer programs for young heirs on financial stewardship and money management.

“Even though some of them don’t have an aptitude or an inclination to learn about money management, it’s still important that they’re financially literate before finding themselves with a significant amount of wealth,” Chilian said.

Many families will form a foundation and have their children serve on the board so they can get their philanthropic feet wet, Johnson said.

“The thing that high-net-worth people worry about is that the money ruins children instead of enriching their lives,” he said.

That’s something that all of us want for our children, no matter how much money we will pass to them — for them to grow up to be productive, self-sufficient individuals wanting to better society.