Only if you inculcated the same standards into your children, which is definitely not a given. If you were just a miser and your children didn't understand your reasoning, I would expect them to blow their entire inheritance and leave a pittance to their children.

Couldn't this be addressed with some kind of legal entity like a generational trust where the children don't have direct access to the principle?

Yes, absolutely, and it would be a great idea if you don't trust the financial competence of your beneficiaries, but you want them to have access to your assets. The problem is that those trusts may be viewed as overly restrictive or unnecessarily burdensome to the beneficiaries and so may not be created in the first place. IE beneficiary needs $X for a rational business investment, but can only get $X/4 out of the trust within the timeframe, even though 1000*$X in total is in the trust.

> IE beneficiary needs $X for a rational business investment, but can only get $X/4 out of the trust within the timeframe, even though 1000*$X in total is in the trust.

I mean, the trust can (usually) invest money without it being considered a distribution. I suspect that happens a lot based on the trustifarians I see in capital-intensive businesses and crushing it (due to below-market cost of capital).

I feel bad for their competitors having to prove themselves to a bank or other arms-length financier.

Often happens over three generations not two