Buffett's Advice to All Parents
"The legendary investor’s company, Berkshire Hathaway said Monday that Buffett will again give a portion of his Berkshire shares, in this case worth about $1.15 billion, to four family foundations. The donations leave him holding 206,363 Class A shares worth about $148 billion.
As he did last November, Buffett is converting 1,600 Class A shares into 2.4 million Class B shares, which hold less voting rights, before donating them to the Susan Thompson Buffett Foundation, named for his late first wife, and to foundations led by his children."
In the Berkshire Hathaway news release, Buffett offered advice to all families.
"I have one further suggestion for all parents, whether they are of modest or staggering wealth. When your children are mature, have them read your will before you sign it. Be sure each child understands both the logic for your decisions and the responsibilities they will encounter upon your death. 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. Over the years, I have had questions or commentary from all three of my children and have often adopted their suggestions. There is nothing wrong with my having to defend my thoughts. My dad did the same with me. I change my will every couple of years – often only in very minor ways – and keep things simple. Over the years, Charlie and I saw many families driven apart after the posthumous dictates of the will left beneficiaries confused and sometimes angry. Jealousies, along with actual or imagined slights during childhood, became magnified, particularly when sons were favored over daughters, either in monetary ways or by positions of importance. Charlie and I also witnessed a few cases where a wealthy parent’s will that was fully discussed before death helped the family become closer. What could be more satisfying?"
Here were my big takeaways that every family can benefit from with their own planning.
1.) Communicate. Your kids want to know your wishes - tell them when you are physically here to do it. There is a direct correlation between a lack of communication and the distress and animosity some families put on themselves. You are not entitled to anything, including your parents' money.
2.) Life is fluid, and things will change. Buffett notes how his children were "not ready to handle the staggering wealth that Berkshire shares had generated" at his wife's death. He goes on to say, "the children have now more than justified our hopes, and, upon my death, will have full responsibility for gradually distributing all of my Berkshire holdings."
3.) Consider tradeoffs with the different seasons of life. "The expected life span of my children has materially diminished since the 2006 pledge. They are now 71, 69 and 66." Buffett recognizes that it is unlikely that his children will be able to give his wealth away before they pass themselves, given their age. But he has more peace of mind that they're up for the massive responsibility than they were at Susie's death nearly 20 years earlier. In his eyes, it was a worthwhile tradeoff.
4.) Make contingency plans, but recognize their inherit limitations. "I’ve never wished to create a dynasty or pursue any plan that extended beyond the children. I know the three well and trust them completely. Future generations are another matter. Who can foresee the priorities, intelligence and fidelity of successive generations to deal with the distribution of extraordinary wealth amid what may be a far different philanthropic landscape? Still, 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. As such, three potential successor trustees have been designated. Each is well known to my children and makes sense to all of us. They are also somewhat younger than my children."
5.) Different does not mean disqualifying. "I have now watched my children grow into good and productive citizens. They have different views in many cases from both me and their siblings but have common values that are unwavering. Susie Jr., Howie and Peter have each spent far more time directly helping others than I have. They enjoy being comfortable financially, but they are not preoccupied with wealth. Their mother, from whom they learned these values, would be very proud of them. As am I.
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Sources: Wall Street Journal, Berkshire Hathaway News Release
The content in this article was prepared by the article’s author and is not intended to provide specific advice or recommendations for any individual. Voya Financial Advisors does not endorse its content, and the views expressed may not necessarily reflect those held by Voya Financial Advisors.
