When it comes to passing on wealth, nearly one-quarter of U.S.-based high- net-worth individuals don't trust their children or stepchildren to protect their inheritance, according to the latest report in the Barclays Wealth Insights series.

Globally, more than one-third of wealthy individuals feel that way, research suggests.

The report, titled "The Transfer of Trust: Wealth and Succession in a Changing World," was released last month and is based on a global survey of more than 2,000 high net-worth individuals in 20 countries. It provides an in-depth examination of wealthy investors' attitudes towards wealth transfer and succession planning, as well as insight into what they believe the future holds for the next generation. It also looks at how wealth can act as a double-edged sword, leading to distrust and conflict.

Chris Johnson, director of wealth advisory at Barclays Wealth, says, "Passing on wealth, values, and a legacy is at the heart of financial planning. It is clear that with wealth comes an increasing complexity of choice especially with respect to intergenerational transfer. In some cases, this can result in concerns about trust or even intrafamilial conflict. Understanding in advance the options for succession planning and seeking professional advice can help address these fears and provide confidence that one's wealth will be wisely managed in the future."

Inheritance and wealth transfer inevitably raise questions about their impact on the lives of recipients, both financially and emotionally. Parents want to pass on material wealth to their children, as well as a roadmap for a happy life. The report reveals some paradoxes about inheritance, succession, and contentment.

While most people are skeptical of the idea that money buys happiness, the report confirms a positive relationship. It also shows a stronger correlation between earning money and contentment—that actually earning wealth, rather than inheriting it, seems to boost financial happiness.

However, a documented drawback of wealth is its ability to cause conflict—and in the context of succession—family conflict. The report reveals that 36 percent of wealthy Americans surveyed have personally experienced family disputes caused by wealth, and 21 percent of them believe that wealth places an unnecessary burden on the next generation.

Johnson says, "This is an increasingly common concern among our U.S.-based clients. It seems that wealth has the ability to act as a double-edged sword, providing happiness, as well as leading to family distrust and discord. The most effective approach to avoiding such conflict is to plan ahead with the help of an impartial adviser with relevant expertise."

High net-worth individuals might be apprehensive about the prospect of passing considerable wealth down to children and the impact on their motivation to make their own mark in life. This is a common rationale for establishing a trust to manage distributions, while still allowing a child access to substantial inheritance. Wealthy individuals might even consider incorporating an incentive clause into a trust structure.

Despite the potential conflicts associated with succession and wealth, the report shows that high net-worth individuals remain committed to passing on their assets to the next generation, with only 3 percent of U.S. respondents believing that this shouldn't be the case. However, more than two-thirds, or 68 percent, of American respondents said that they require a great deal of professional advice when deciding on an inheritance plan for their children and stepchildren.

Prenuptial agreements

There are also instances complicated by sensitivities related to prenuptial agreements. While more than three-fourths—76 percent—of wealthy Americans may think that a prenuptial agreement is important for the protection it affords, only 11 percent actually have one in place.

Obtaining a prenuptial agreement from a loved one isn't necessarily the easiest conversation to approach, whether driven by someone getting married for the first or second time or by a parent whose wealth is being passed down. For this reason, many wealthy individuals consider the alternative of implementing lifetime trusts for the benefit of their children. Such trusts act as a forced prenuptial agreement, since the assets passed down from a parent remain in the trust forever. Assets held in a such a trust are protected from characterization as a "marital asset."

There are a number of different ways to transfer wealth to the next generation, but one of the most common instruments used is a will, and nearly all—94 percent—currently have one in place, survey data indicate. Yet, once a will is in place, it's important not to forget about it. Quite the opposite is true, and most wealthy Americans surveyed agree. Half of U.S. respondents have revised their wills at least once, and 35 percent have revised them three or more times.

Globally, the primary trigger for a will revision is increase in wealth, while in the U.S., the primary reason is tax efficiency/planning, the survey found.

Also, the inherited dollar seems to be treated differently than the earned dollar. High net-worth individuals have a tendency to want to preserve inheritance money and can be reluctant to spend it or invest it in what they perceive to be risky financial instruments. In some cases, they'll keep their inheritances separate from wealth they earned themselves.

This preservation instinct is moderated by the personality and lifestyle of the deceased and the nature of the relationship. As a result, this money is viewed as having "personality." Wealthy people's views on whether and how to transfer wealth are in part influenced by their values, which they often learn from their parents.

Sixty-six percent of U.S. survey respondents said their values were very similar to their parents, and 82 percent said they are more likely to allocate assets to children whose values are most similar to their own.

"For wealthy parents, setting up a philanthropic vehicle is one method of passing down their value systems to their children," Johnson says. "Not only are their children given the occasion to participate in investment management discussions and decision making associated with the trust or foundation, but it also provides the opportunity to become involved in a charitable initiative."

Barclays Wealth is the wealth management division of London-based Barclays Bank PLC, functioning in the U.S. through New York City-based Barclays Capital Inc. Barclays Wealth provides private banking services and other services.