Big Inheritance Might Hurt More Than Help

“How Much Should I Give to My Family? On The Risks and Rewards of Giving,” from Merrill Lynch’s Private Banking and Investment Group, takes a look at the great transfer of intergenerational wealth now under way.

Most high-net-worth parents (91%) 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. Yet the survey results indicate that many see significant risk in passing on wealth without context, conversation, guidance or accountability. Parent respondents note that fear of disrupting family harmony and a lack of clarity rank high on the list of reasons not to discuss giving.

Nearly half (46%) of respondents are concerned about giving too much money; only about half are confident that the distribution of their assets will have the intended impact. The greater their assets, the greater the level of concern.

When is an inheritance or gift too large? Nearly half (46%) say “when the money creates a disincentive to achieve one’s full potential.” The tipping point, according to 28%, is when the recipient can indulge in a perpetual life of leisure.

Among the findings:

• 63% say they have documented or defined plans to pass financial assets to others, but only 29% have had a conversation with the recipients;
• More than half (52%) of all respondents and 42% of those with more than $10 million in assets intend to distribute virtually all of their remaining assets after they die, with their wishes outlined in a will or trust and estate plan;
• 16% have articulated their intended purpose via letter;
• 3% used a values statement to convey their wishes; and
• 2% turned to video to outline their wishes.