How Much Should You Leave Your Children?

Many wealthy people have trouble dealing with the amount they should leave their children at their death or more often, much earlier. There are several factors people have trouble with.

  1. Control
  2. Trust
  3. Deflecting children from failure
  4. Concern for their own future security.

A vision for the future

People with wealth far exceeding any need to provide for their living generally have to address all of the first three points. Once you have guaranteed your retirement spending, dealing with the surplus is a stewardship issue. Take Bill Gates. He has offered a strategic vision that makes sense.

How should you manage your estate strategically?

The strategic Gates approach, “I intend to provide them with enough that they can have choices over what they do, but not so much that they can do nothing.”

Once that is clear people can deal with the first three issues.

Control and Trust

Control is a wasteful emotional need. Owning surplus assets too long limits how they will grow. We see it most often with businesses. When is the right time to turn over the business to the next generation? Answer – sooner than you think. When should you invest your surplus financial assets on terms appropriate for your children? By the way, your advisor could get into trouble doing it for you.

If you recall your own career, you will notice the experimenting and growing was most pronounced when you were younger. More energy and more risk tolerance. As we grow older we usually replace risk taking skills with risk avoidance.

Your contribution to control is to transfer your knowledge about the business and provide them with the tools to manage risk. Many do it by becoming a member of the board of directors, or maybe as an ad hoc consultant or new project leader. The best transitions on the control front happen when parents trust the children because they have trained them well AND the children trust the parents to give them the space to run the business their way.

Deflecting children from failure

Every parent wants to shield their children from harm. Remember teaching them to ride a bicycle or to swim. When should you accept they learn more by having the opportunity to fail and the skills to learn from the failure?

If children have been reasonably trained, then what’s the hold up? If they have not, what can you still do about?

Ultimately deflecting this failure potential is about mistrusting your guidance while they were young or recognizing your failure to provide it at all. Are you doing this to protect your ego?

When you get by the ego thing and still decide you cannot in good conscience provide a large capital sum, you can reinvent the process. Start with a smaller amount. Enough to do something with, but an affordable loss if they mess up. Maybe as a partner, so they can participate in the decisions and get some guidance.

If they still know nothing then other choices will prevail. Your will should provide them with income beyond your death and maybe capital should move to grandchildren. Ideally, the ones who have acquired the skills.

The takeaway

  1. Be sure you know why you are allocating capital to your children in a particular way.
  2. Sooner is better
  3. If they are not ready, what are you doing about it?
  4. Starting early to train them is best. 6-year olds are naturally entrepreneurial.


I help people understand and manage risk and other financial issues. To help them achieve and exceed their goals, I use tax efficiencies and design advantages—the result: more security, more efficient income, larger and more liquid estates.

Please be in touch if I can help you. 705-927-4770

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