On Nov. 25, 2024, Warren Buffett converted 1,600 A shares into 2,400,000 B shares. The B shares were then spread among four Buffett family foundations: The Susan Thompson Buffett Foundation, The Sherwood Foundation, The Howard G. Buffett Foundation and NoVo Foundation.
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On the day Buffett did this, he shared a letter with shareholders that explained the thinking behind his calculated (as always) money move. In the letter, which exudes both buttoned-up integrity and a kind of reflective vulnerability that we may not expect to be publicly shown by multibillionaires who can send the entire stock market into a tizzy with a single maneuver, Buffett discussed his estate planning method and underscored the importance of transparency and feedback from prospective heirs.
“When your children are mature, have them read your will before you sign it,” Buffett wrote.
The Oracle of Omaha, as Buffett is admirably known, went on to highlight why it’s so important that your kids have a say in your will.
If Your Children Are Good People, They Deserve This
Buffett imparted a golden nugget of wisdom that any parent who is passing down generational wealth should contemplate: “Leave children enough so they can do anything but not enough that they can do nothing.”
Buffett went on to say that he and his late wife Susie encouraged their kids to be philanthropic. Their kids did just as their parents wished, and with gusto and intelligence.
“At [Susie’s] death, however, they were not ready to handle the staggering wealth that Berkshire shares had generated,” Buffett wrote. “Nevertheless, their philanthropic activities were dramatically increased by the 2006 lifetime pledge that I subsequently made and later expanded.”
Buffett shared that he and Susie’s children have exceeded their parents’ expectations. As such, upon Buffett’s death, they will take the reins of his empire, “gradually distributing all of my Berkshire holdings,” Buffett wrote. “These now account for 99½% of my wealth.”
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If They’re Lucky, Kids Get Old Too
Another salient reason for kids to have a say in your will arises as they advance in age. They’re getting older, too. Buffett shared that his kids are now 71, 69 and 66.
“I’ve never wished to create a dynasty or pursue any plan that extended beyond the children,” Buffett said. “…the massive wealth I’ve collected may take longer to deploy than my children live. And tomorrow’s decisions are likely to be better made by three live and well-directed brains than by a dead hand.”
Buffett appointed three potential successor trustees.
“Each is well known to my children and makes sense to all of us,” Buffett wrote. “They are also somewhat younger than my children. But these successors are on the wait list. I hope Susie, Howie and Peter themselves disburse all of my assets.”
Heirs Need To Be Prepared
People who are about to receive a life-changing inheritance need to know what they’re in for and what wishes come with the inheritance. In Buffett’s case, he wants all foundation actions his children make to require a unanimous vote, meaning all three must agree.
“How can this be workable?” Buffett wrote. “I’ve explained that my children will forever be besieged with earnest requests from very sincere friends and others. A second reality: When large philanthropic gifts are requested, a ‘no’ frequently prompts would-be grantees to ponder a different approach – another friend, a different project, whatever. Those who can distribute huge sums are forever regarded as ‘targets of opportunity.’ This unpleasant reality comes with the territory.”
With the “unanimous decision” provision, each heir mustn’t make a big move without their siblings’ consent. Though this helps, it doesn’t seal off all exposure to headaches. For example, “it doesn’t solve the daunting problem of intelligently distributing many billions annually,” Buffett wrote. But it’s a help, and it’s important that each of Buffett’s heirs understand what’s to come.
Your Children Should Know Your Logic and Their Responsibilities
We’ve all seen the movie(s) where the son or daughter expects a windfall from their wealthy parents and then is shocked to learn that they were removed from their will. Or, the reverse: A down-and-out guy finds out a mysterious relative has died and left him a million dollars. Maybe you’ve even encountered scenarios like this in real life. They make for exciting, dramatic stories and totally dysfunctional realities.
Your kids and other heirs should understand the thinking behind your final wishes, along with whatever responsibilities come with it.
“Be sure each child understands both the logic for your decisions and the responsibilities they will encounter upon your death,” Buffett wrote. “If any have questions or suggestions, listen carefully and adopt those found sensible. You don’t want your children asking ‘Why?’ in respect to testamentary decisions when you are no longer able to respond.”
You Never Know When Your Time Here Will Be Up
There’s a sense that Buffett’s heart was not only full, but heavy when he penned this letter to shareholders discussing his decision to reduce his Berkshire Hathaway Class A shares. We see this particularly in the beginning, when he spoke of his first wife, Susie, who died in 2004.
“For decades, we had both thought that she would outlive me and subsequently distribute the vast majority of our large fortune,” Buffett penned. “That was not to be.”
Buffett, who will turn 95 in 2025, did not shy away from the inevitable fate that every mortal being faces.
“Father time always wins. But he can be fickle – indeed unfair and even cruel – sometimes ending life at birth or soon thereafter while, at other times, waiting a century or so before paying a visit,” Buffett wrote. “To date, I’ve been very lucky, but, before long, he will get around to me.”
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This article originally appeared on GOBankingRates.com: Warren Buffett: Why Your Kids Should Have a Say in Your Will
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