How much money should you leave your children? How do you ensure that your hard work benefits your heirs, and doesn’t destroy them?

Over the next few decades, America will see the greatest-ever transfer of wealth from one generation to the next. Notwithstanding all those hours spent running on the treadmill and drinking green tea extract, Baby Boomers, sadly, will not live forever. Those lucky few who have hit the financial jackpot will have to decide how best to give away their wealth, a complex issue on many fronts.

The head of Wilmington Trust, Tony Guernsey, has worked with dozens of families over the past 36 years, and puts the pitfalls into stark relief. “I have never seen anyone made happy by inheriting a lot of money,” he says. Can that possibly be true?

Mr. Guernsey tells horror stories about people trying to manipulate their heirs from the grave, citing especially the misuse of “incentive trusts.” Many such trusts reasonably aim to reward a child for keeping a job or for choosing a worthy but not lucrative career, such as teaching, by matching income dollars. However, there are cases where the incentives are more personal.

Mr. Guernsey knows of one fellow who specified in his will that any child or grandchild who chose to attend his beloved alma mater would receive $100,000 a year. If the youngster were to play a varsity sport, the annual stipend would be increased to $250,000; football was awarded $500,000, and if the heir became captain of the football team, he would receive $1 million a year.

The director of the Money, Values, and Family Life Project at the Ackerman Institute, Judith Stern Peck, is skeptical of such arrangements. “It’s all about the person giving, not about the person receiving,” she says. She puts the dilemma faced by parents this way: “You don’t want to take away ambition or deny your children the pleasure of achievement. You have to walk the line.”

The fear is that too much money showered on a young person will drive quit his job, throw his inheritance away on Maseratis or houses in the Hamptons, and that ultimately he will end up with nothing.

The managing director at Northern Trust, John Hoffman, says this concern limits how much his clients are willing to give to their children during their lifetimes. Even those with estates valued in the hundred of millions, he says, consider $10 million to $20 million plenty to give outright.

The balance is put into trusts that can reach grandchildren, or that can operate in perpetuity. It is important, Mr. Hoffman counsels, to select as co-trustee (along with an institution) someone who knows the family well and who can translate the parents’ values to the next generation.

Structuring a trust wisely, and giving the trustee appropriate discretion, is important. Mr. Guernsey relates the well-known story of a fashionable woman who long ago left her money in a trust that could be invaded only for the purchase of fancy clothing. Apparently, the children grew up poorly educated and nearly homeless, but all the while were exceedingly well dressed.

At what age should a child be given money?

The president of Rockefeller & Company, Jim McDonald, says best practices today call for giving money to children in stages rather than in one large sum. This approach helps them adjust to dealing with wealth. Most advisers suggest that children receive their first inheritance in their 20s or at 30, with the last installment being made at 40, when they are considered mature (finally).

Parents need to revisit these arrangements many times during their lifetimes. Mr. Guernsey suggests that most people should rewrite their will five to seven times, as their situation changes.

“It’s not a decision you make today and it’s over. It’s just like a business; you have to keep adjusting it,” Ms. Peck says.

The experts agree that the most important responsibility of a parent bequeathing wealth is to educate the next generation about money — how it is managed and how to be good stewards of an estate. They suggest discussing your financial situation with your children early on: a difficult proposal because, as Ms. Peck says, the subject is still “taboo” in many families.

Mr. Hoffman points out that some of his clients have postponed such discussions until the children are already embarked on a career, so as not to undermine their ambitions. “It’s a two-edged sword,” he says. “You don’t want them to know at age 21 that you will always be able to bail them out, but neither do you want them to be ignorant about their circumstances.”

Mr. McDonald says problems arise at the margin — in those families that pretend they have no money, or those that turn over vast sums to young people. He cites as another common mistake the tendency to treat all the children and grandchildren as though they are the same. This issue argues for giving the trustees wide latitude.

Mr. Guernsey suggests that it is inappropriate to raise your child in a wealthy setting and then turn them loose to fend for themselves when they graduate from college. Ms. Peck agrees. “You have a responsibility to help your kids to maintain their quality of life, if you are able,” she says. However, you can do this by loaning your child money to purchase a house, for instance, as opposed to simply giving them the money. This way, they take some responsibility for the obligation.

Many advisers favor leaving some assets to a foundation headed by your children. This arrangement will help them meet their own future philanthropic obligations, such as their children’s annual school drive. Families are encouraged to bring their children into the management of the foundation when they are young. Seeing how the gifting decisions are made and how the investments are managed will further speed the financial education process.

Because the current retiring generation is living longer than expected, some people are literally running out of money. Some well-meaning souls have given away their wealth in their 70s and 80s, heeding the actuarial tables, only to find themselves strapped for cash at age 95. “You have three obligations – taking care of yourself, your children, and your social responsibilities,” Ms. Peck says. Mr. Guernsey adds a fourth — Uncle Sam. Even more reason to consult an expert.

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