"The appropriate amount of funds that should be given to children is an amount that helps them maintain a modest lifestyle while leaving the balance for future generations," Grant Jr. and Grant III write.
"You want to equip the next generation with the resources needed to maintain and build on your legacy; however, you don't want to give them so much that they have no need or desire to develop the skills needed to be self-sufficient," they write.
Parents can assign incentives to a trust
To help their clients get it right, Grant Jr. and Grant III told Business Insider that they advise setting up a trust fund with incentives. A trust is a legal entity that can hold almost any asset, including real estate, bank accounts, investment accounts, business interests, and life insurance policies. A benefactor can set up a trust during their lifetime and state exactly how and when they want their beneficiaries to be paid or given property.
An incentive, for example, could look like this: A parent stipulates their child must graduate within the top 10% of their high school class to get money for college. It may further require them to graduate in the top 10% of their college class to get cash for a down payment on a house or seed money to start a business.
To be sure, anyone with a decision to make about how much wealth to pass down to their children is in a position of privilege to begin with. But it's an important consideration because the issue is a "huge blind spot" in estate planning, according to the advisors.
Putting incentives in place acts as both a safeguard for the cash and a mechanism for instilling the habits used to create the wealth initially. Above all, it allows families to transfer their values, whether it be education or philanthropy, to the next generation.
As Grant Jr. and Grant III analogize, giving your heirs the keys to an expensive new car without teaching them how to drive it and maintain it well is a mistake waiting to happen.