Warren Buffett Memo on Estate Planning and Charitable Giving

Warren Buffett is known for his annual Letters to Shareholders, but last week he also made some extended comments inside a Berkshire Hathaway news release about to his charitable giving and estate planning. As with most of his writing, it is concise and direct, and thus worth reading the original. Here are a few of my takeaways after reading the “mini-letter”.

Many who diligently save and invest will achieve “runaway” wealth, especially those that live a long time. This includes a lot of Berkshire Hathaway shareholders, and many of them choose to give the excess back to society instead of keeping it in the family.

Things didn’t look great when I arrived at the beginning of The Great Depression. But the real action from compounding takes place in the final twenty years of a lifetime. By not stepping on any banana peels, I now remain in circulation at 94 with huge sums in savings – call these units of deferred consumption – that can be passed along to others who were given a very short straw at birth.

It also has been a particular pleasure to me that so many early Berkshire shareholders have independently arrived at a similar view. They have saved – lived well – taken good care of their families – and by extended compounding of their savings passed along large, sometimes huge, sums back into society. Their “claim checks” are being widely distributed to others less lucky.

Regarding wealthy parents and how much to give their children.

These bequests reflected our belief that hugely wealthy parents should leave their children enough so they can do anything but not enough that they can do nothing.

Regarding ALL parents and leaving stuff to their children. Talk to them while you are still alive!

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.

The overall plan is that he is leaving his BRK shares to family foundations, whereupon his three children will be responsible for overlooking their disbursement. Buffett always believed in a “circle of competence”, which means that just because you are good at one thing, that doesn’t mean you are good at everything… Apparently, his circle doesn’t include dealing with the world of charitable grants. His children have agreed to take on this important responsibility, and all three have to agree unanimously for a grant to occur.

Passing on family values, not just money.

Instead, we shared a view that equal opportunity should begin at birth and extreme “look-at-me” styles of living should be legal but not admirable. As a family, we have had everything we needed or simply liked, but we have not sought enjoyment from the fact that others craved what we had.

©

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