The “great transfer of inter-generational wealth” now underway is causing concern among some wealthy families that it could do more harm than good for the next generation, according to new research by Merrill Lynch’s Private Banking and Investment Group.

The report, How Much Should I Give to My Family? On the risks and rewards of giving, is based on findings from a US survey of 206 high net worth parents and is the third in a series of papers by the firm on family wealth and sustainability.

It emerged that most (91 per cent) plan to leave the lion’s share of their wealth to family members, motivated, unsurprisingly, by a desire to positively influence the lives of loved ones. And while many see “significant risk” in passing on wealth without context, conversation, guidance or accountability, they are also thwarted by fear of disrupting family harmony. Meanwhile, nearly half (46 per cent) of high net worth individuals are concerned about giving too much money, and only about half are confident that the distribution of their assets will have the intended impact, Merrill Lynch said.

Indeed, there appears to be a disconnect: while over six in ten (63 per cent) have documented or defined plans to pass on financial assets to others, only 29 per cent have spoken to the intended recipients about it. Despite a stronger industry focus in recent time on issues around family governance and preparing the next generation to be good stewards of wealth, for example, there still seems to be room for improvement in terms of the role advisors have in helping families understand the importance of discussing these crucial life topics - and, more importantly, how to approach doing so.

How much?

When asked at what point an inheritance or gift is considered too much, 46 per cent of respondents cited “when the money creates a disincentive to achieve one’s full potential,” while 28 per cent said it is when the recipient can "indulge in a perpetual life of leisure."

“Too often, people think only about dollars amounts, not impact, when deciding how much is too much to give,” said Michael Liersch, head of behavioral finance and goals-based development 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.”

Merrill Lynch noted that while many wealth creators want to be fair and equitable in the distribution of their assets, their concern about giving too much is often associated with how it might affect a specific person of group of people, such as a child with special needs or a family member struggling with addictions.

“Many wealthy families shy away from discussions about wealth, and their avoidance can impede the very real and important process of defining priorities for wealth and giving,” said Stacy Allred, a managing director and wealth strategist in the Merrill Lynch Private Banking and Investment Group and leader of Merrill Lynch’s Center for Family Wealth Dynamics and Governance. “Unfortunately, discussions around wealth tend to occur only at big life junctures, such as an illness or death, when it is often too late to influence the way wealth is distributed, perceptions of the gift by its recipients or how they use it.”

Reinforcing this, the survey found that the top three events that trigger a dialogue about wealth transfer are: a health issue (56 per cent); death of a family member or friend (43 per cent); or an initial discussion with a professional advisor (34 per cent). The primary reasons for not talking with family about giving are: (1) simply not thinking about it, and (2) concern about disrupting family harmony.

Dr Richard Orlando – founder and CEO of the independent firm Legacy Capitals and author of LEGACY, recently wrote on the pages of Family Wealth Report that wealth holders rarely avoid talking to the next generation about their finances because they lack communication skills.

“In reality, they fear the implications of others knowing about their wealth, such as their children developing affluenza or being taken advantage of. Additionally, some believe that one is not supposed to talk about money, or that to do so is crass.”

He added: “However you personally feel about having money conversations within your family, remember that two-way communication is crucial to the next-generation’s preparation of handling it in the future." See more on that here.