Buffett's $84 Trillion "Legacy Wealth Transfer" Arrives
The world is on the cusp of an approximately $84 trillion "massive wealth transfer," and Warren Buffett advocates not shying away from unpleasant topics such as wills to avoid sowing the seeds of family conflict.
The CEO of Berkshire Hathaway and legendary investor, Warren Buffett, warns that estate planning may determine the happiness and harmony of one's family after your passing. "Time is the victor, but it can also be capricious," the 94-year-old billionaire wrote in a rare candid public letter released on Monday.
Buffett stated that he will once again donate a portion of his Berkshire Hathaway shares, valued at approximately $1.15 billion, to four family foundations. After this donation, he will still hold 206,363 Class A shares, worth about $148 billion.
In November last year, Buffett converted 1,600 Class A shares into 2.4 million Class B shares and then donated these shares to the Susan Thompson Buffett Foundation (named after his late first wife) and foundations overseen by his children.
Buffett's three children, now in their 60s and 70s, need to unanimously decide on the use of their father's money. In his new remarks to shareholders, Buffett said this requirement would provide a certain level of protection for his children from bombarding demands. "I know these three people very well and trust them completely," he wrote.
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Buffett's substantial position in Berkshire Hathaway means that a quick sell-off of his shares could shake the stock price. He wrote that his children should gradually distribute his shares and that the distribution method "must not betray the special trust that Berkshire shareholders have in Charlie Munger and me."
Buffett's Advice
Discussing death is a taboo subject for many, and planning the distribution of assets is equally headache-inducing. However, as the world is about to witness an approximately $84 trillion "massive wealth transfer," Buffett advocates not avoiding such unpleasant topics to prevent the potential for family conflict.
As one of the world's richest individuals, Buffett's net worth exceeds $151 billion. He pledged as early as 2010 to donate at least half of his wealth to charity. Although Buffett's wealth is beyond the imagination of ordinary people, he offers advice applicable to all parents:
"Regardless of the amount of wealth, when your children are mature enough, let them read it before you sign the will."
Buffett believes that a will should be a conversation between parents and children. He suggests that parents explain the logic behind the decisions in the will and the responsibilities their children will bear in the future, while also seriously listening to their children's feedback and incorporating reasonable suggestions. He admits that he has shared the contents of his will with his children over the years and listened to their opinions. He wrote, "There is nothing wrong with having to defend my ideas; my father did the same thing back then."
However, in the United States, many people consider "talking about money" taboo. According to a Fidelity Investments survey, 56% of Americans say their parents never talked to them about money, but 81% believe that receiving financial education at a young age would be very helpful.
Buffett mentioned that if the will is vague or not communicated with the family beforehand, it could lead to family disputes. "Over the years, Charlie (the late business partner Charlie Munger) and I have seen many families turn against each other after the execution of a will's wishes," he wrote.
Especially when there is favoritism among children in the will, this tension can be further amplified. On the other hand, he pointed out that a well-discussed will can help families become more united. He emphasized, "You do not want your children to question the decisions in the will with a 'why' when you can no longer respond."
Buffett follows a core principle when distributing wealth: "Super wealthy parents should leave their children enough wealth to do anything, but not so much that they can do nothing."
Although he previously donated a large amount of wealth to the Gates Foundation, he recently stated that these funds will no longer flow to the Gates Foundation after his death, but will be handled by new charitable trusts managed by his three children. Buffett also revealed that he allocated an additional $1 billion to family foundations. He firmly believes that planning and communicating openly can avoid many potential inheritance disputes and allow family members to better face the challenges brought by the "massive wealth transfer."
Berkshire's Class B shares have risen by 34% this year, while the S&P 500 has risen by 26%. Earlier this year, the company joined the "club" of American companies with a market value exceeding $1 trillion.