By Claire Symonds

It is one of the biggest dilemmas that wealthy parents face. How to prepare children to inherit wealth without putting temptation directly in their path and while also ensuring that they truly understand the value of money.

But money is a sensitive subject and while children may have some understanding of their parents' wealth, it does not follow that they have any real understanding of how to manage it themselves or the extent of the impact it can have on their own lives. And if they do have access to everything money can buy, how do parents still motivate their children to try and make a success of themselves in their own right?

Mark Evans Head of Family Business and Philanthropy at Coutts has seen this situation arise on many an occasion. "Often parents want to give their children everything they felt they didn't have when they were younger, which is fine as long as those children are really taught the value of what they are being given," says Evans. "However problems can arise later when parents, having in many cases worked hard for many years to build their wealth, begin to worry about the fact that those children may grow up to feel that wealth is their right, rather than something they themselves should also strive to achieve."

So how do families avoid such scenarios? Thayer Willis, herself an heir to the multi-billion dollar Georgia-Pacific Corp. fortune and now a counsellor to the very wealthy about their lives and their money, has dedicated an entire book to the subject. In Navigating the Dark Side of Wealth - a life guide for inheritors, she states that, "Wealthy parents can't afford not to give their children direction along with their money. If a parent gives financial assets, the real gift is guidance on how to use them."

Evans agrees: "Guidance is vital as many children only really have a vague idea of their family's wealth, and to be suddenly handed a multi-million pound lump sum does no-one any good. One of the many ways we help families to engage children is to form a 'family council', enabling the family to be much more transparent about its wealth but in an environment where children will listen to and work with their parents, and in a way that educates them early about their responsibilities. A family council is an organised forum for discussing and making decisions relating to the wealth and well-being of the family through the generations.

"A family council can bring about a level of openness and trust which to help children to really understand their parents' financial priorities and objectives, and can also manage their expectations. It puts a definitive framework around the family as a unit, allowing all to be involved in the decision making process. It can give children a greater sense of responsibility and accountability for the family's finances, that they might not otherwise have."

So how is a family council set up and what is it actually there to agree on? Evans believes that the goals must be clear from the outset. "Some families may be very open and want to discuss everything with their children, whereas others may not. You may get some that use the councils as a way of getting a child involved in the family business, for example, or to just teach them some basics about asset allocation and investments. Generally I find most families also use the councils as a way of educating their children about the family's financial values.

"Indeed many find that philanthropy is the key driver behind a family council and a really good way to bridge the gap between parents and children while educating them at the same time. By getting the children involved in deciding how much and to which charities money is donated, it can really empower them. It provides a great way for a family to unite around a common purpose while also acting as a powerful tool for teaching the next generation about the value of money and how they can effectively use it."

So why don't more families hold family councils? "It isn't necessarily for everyone," adds Evans. "Each family has to find its own way of doing things and for some the idea of sharing everything in an open forum simply isn't right for them.

"That is why we recently launched a formal course on 'Assets and Responsibilities' for clients who want their children to have a really rounded understanding of money as well as the responsibilities that come with it. The course covered a broad range of subjects such as how to save, spend and invest and how to think about their own future direction, with for example, entrepreneurship. The networking element of the course is also quite important here. For some it can be the first time that they have met other people their own age who face similar challenges. It gives them a freedom of speech that they may not find usually within their family and can really help with their understanding and focus."

As Willis succinctly sums up, "Everyone wants to create a legacy that shows the best of who they are. Your children should be your finest work. What they do with the values and wealth you give them, goes on and on in this world."

We will have a full review of the Assets and Responsibilities Course in our September issue.

Coutts Asset and Responsibility courses are currently aimed at children aged 17 - 23. If you are a client and would like to enrole your son or daughter on the next course, or for further information about the course itself, please email please contact your private banker.

For more information about Thayer Willis or to buy Navigating the Dark Side of Wealth - a life guide for inheritors, please visit  www.thayerwillis.com