How Much Is Too Much To Leave My Heirs?

Anyone with the means to create generational wealth has probably weighed this concern: Should I limit how much I leave to my children or grandchildren?

The wealth you share with heirs has the potential to provide them with significant opportunity and security, but it's not unusual to have concerns that the assets could be used unwisely. A first step to ensure that your wealth legacy doesn't do more harm than good may be to start a family conversation focused on finding common values and nurturing a shared purpose for the assets. Good stewardship of a legacy becomes more likely when family dynamics are clearly understood and when there is deeper involvement by members of each generation. 

There's likely no right answer when it comes to how much to leave to your heirs, but thinking through several factors may make the path forward a bit clearer.

How much to leave to your heirs is really a question of whether they're equipped to prudently manage a substantial inheritance. Consider their:

• Skills: Some financial knowledge, and an interest in learning more, can be key to sustaining—and ideally growing—an inheritance. Assessing the abilities of an heir is partly a judgment call about their personality, habits, and knowledge, but there are also clear red flags that you shouldn't ignore. Unpaid debts, excessive spending, or problems with creditors may be signs of trouble, though they might also show a person who is simply struggling to make ends meet. On the other hand, previous lawsuits, gambling issues, and drug use may be more worrisome indicators that an heir isn't in a position to manage their inheritance effectively.

  But don't jump to conclusions, and have an honest conversation with your heir. A doctor or lawyer with years of education won't necessarily be competent at managing a significant sum of money, while a person who has been in low-paying jobs for years may be well-prepared to make responsible use of additional resources for her or his family.

• Goals: What do you know about what your child or grandchild wants to do with their life? Their goals can help inform how much money you ultimately give them—both during and after your lifetime.

  If a child has a promising idea for a new business, that may suggest a meaningful path for your giving. Likewise, a grandchild who is headed for medical school may need significant financial support as they complete their studies and start to build a successful practice. Conversely, leaving an inheritance to an heir who seems aimless and unsure of their future might require a different tack—less money or perhaps funds in a trust.

• Expectations: An heir who feels entitled to wealth may lack the drive to build their own. If you offer them support, will it be at the expense of their personal growth? When possible, having candid conversations about the family's history, values, and intentions can help heirs start to view their inheritance not as something they're entitled to but rather as a family legacy that's worth preserving—and building upon—for future generations.

Setting your heirs' skills and motivations aside for a moment, think about what you're hoping to achieve with your wealth. For some estate owners, creating a multigenerational legacy that endures for decades is of utmost importance. Perhaps this means building a charitable foundation or providing a transformational gift to an existing organization. For others, the primary aim may be to help their children and grandchildren take risks and pursue their ambitions without the fear of financial hardship hanging over their heads.

If you're worried about the possibility that an heir could make poor use of their inheritance, or that your generosity might keep the recipient from finding their own way, you may want to limit your bequests—or put guardrails in place to ensure certain scenarios don't come to pass. The main avenue to establish rules and protections around an inheritance is creation of a trust.

Rather than gifting money or leaving money to heirs outright, creating a trust can give you more control over how the inheritance is distributed and ultimately used. Discretionary trusts can be tailored for a range of goals. One common use is to structure a gift or a bequest  for a minor child that will become available at a milestone such as graduation, marriage or a certain age. If the aim is to help someone purchase a home, you can give the trustee discretion to only release funds when the beneficiary is ready to buy.

A trust can also shift the stewardship of the funds to a trustee, which may be especially attractive in instances where there's concern about the heir's financial skills or emotional maturity. Putting such protections in place might even make it feasible to leave a larger inheritance than you would otherwise.

There are many trust strategies you can deploy depending on your intentions—such as adding spendthrift provisions, which protect the assets from an heir's creditors. An experienced estate-planning attorney can help you decide which approaches are right for your own goals and your heirs' needs and situations.

Determining how much to leave your heirs ultimately comes down to finding an amount that will empower their futures without impeding their personal growth. There's no one-size-fits-all solution, but careful deliberation and open communication can help you create a lasting legacy that supports your family's financial well-being for generations to come.