Warren Buffett’s most recent advice on estate planning, delivered in response to a question at Berkshire Hathaway’s AGM, was as good as it gets.
I sit at my desk at The Inheritance Project, which consists of one small room, one person, nine publications, and nine years since the first book, The Legacy of Inherited Wealth: Interviews with Heirs. I am singlehandedly attempting to keep The Inheritance Project just barely visible because I am unable to understand Google’s impenetrable algorithm logic. I am laboriously typing from an article in today’s The Globe and Mail, May 20, 2013. An article by Thane Stenner in the “Globe Investor” section, called “Lessons in estate planning from Warren Buffett,” offers sage advice from the best expert in the field (IMHO). I humbly submit portions of his wisdom straight from The Globe. (This newspaper perversely keeps its articles online for only one day, so I won’t even try to create a link.)
Here’s an abbreviated portion of the Berkshire Hathaway AGM:
Buffett: “I think more of our kids are ruined by the behavior of their parents than by the amount of [their] inheritance.” [The audience cheers.] “If you want to make sure your kids don’t grow up to be spoiled brats, focus less on the structure of your estate and more on the environment they grow up in, and what you show them about how you handle money.’”
“As his kids have matured and become successful in their own right,” comments Stenner, “obviously Mr. Buffett feels more comfortable with leaving them a more substantial portion of his estate. I’m glad to hear that. I’ve seen a number of situations where children become bitter and resentful because they feel they haven’t been treated ‘fairly’ in their parents’ wills. Which leads to Mr. Buffett’s next point. ‘Your children are going to read the will someday. It’s crazy for them to read it [for the first time] after you’re dead. You’re not in a position to answer questions unless the Ouija board really works.”
Stenner: “Lack of communication is a very common problem with estate planning. Too often, privacy leads to disaster, with family members bickering and fighting with each other. Far better to have conversations with your heirs before the will is read.”
Buffett: “I rewrite my will every five or six years.”
Stenner: “I’m amazed at how many people write a will and let it sit in their safety deposit box for the next twenty years. Good to hear Mr. Buffett hasn’t done this. As his thinking about inheritance has evolved, so has his will.”
Buffett: I do think that if you’re very wealthy…. the money has more utility to society than to create a situation where your kids don’t have to do anything in life except call a trust officer once a year.”
Buffett’s advice isn’t limited to billionaires. Parents: think twice about what you are doing when you make your estate plans: An unfairly drawn will can have negative consequences far into the future. I saw firsthand the awful mess my own father created with his own estate planning, and his estate was a tiny fraction of Buffett’s—one tenth of one percent. My father managed to treat both his children and his grandchildren in so grossly unfair a way—leaving twice as much to one of his children (not me), and deliberately excluding his second grandson (my adopted son) out of his will—while leaving too much to his genetically legitimate grandson. No matter what I do, I will never be able to even out the injustice or the ill will he has created.
According to a Buddhist saying: Generosity is the virtue that produces peace.”