As one of the wealthiest individuals on the planet, Warren Buffett's public disclosure of some of his estate planning earlier this summer no doubt attracted plenty of interest. In addition to gaining insight into what will happen to one of the world's largest assets, there was also some valuable insight for clients at all different levels of wealth.
Flexibility
Buffett reminds us that estate planning documents should be flexible to anticipate any changes and be updated, or at least revised, periodically. In his interview, Buffett said Wall Street Journal he has changed his will several times and that he “(h)arrived at the current plan after seeing how his children matured over the years.” Because it is often difficult to assess in advance whether a child may end up being more financially responsible or, for example, needing some extra provision for expenses, leaving the flexibility to change the documents is essential. Other significant life events, such as divorce or moving across state lines, should also warrant a thorough review of documents, especially state-specific ones (for example, health care directives).
Transparent
For someone with an extraordinary net worth, Buffett's planning seems somewhat ordinary. In a move to be transparent with the public about his plans, Buffett wrote in a newsletter to Berkshire Hathaway shareholders, “After my death, the disposition of my assets will be an open book – no 'imaginary' trusts or foreign entities to avoid public scrutiny, but a simple will available for Court inspection of Douglas County”. Instead of using sophisticated estate planning vehicles, he's laying it all out for the public to see. While privacy for high-net-worth families isn't necessarily bad, Buffett's decision to maintain transparency underscores his philanthropic intentions to help society at large.
“Although it is unusual for parents to make their intentions public, Buffett's decision will certainly manage his children's expectations of their inheritance. Using uncomplicated estate planning tools such as charitable planning, his estate will not be challenging to administer and should provide tremendous benefit to society,” said Jonathan S. Forster, shareholder/ principal at Weinstock Manion.
Change of Plans
One interesting and significant change that Buffett announced in his interview was that his donations to the Bill & Melinda Gates Foundation will end. Buffett has given generously (more than 40 billion dollars over the past 15 years) to the Gates Foundation as part of the Giving Pledge, and it is a surprise to many that his donations will end with his death. Instead, Buffett's remaining billions will go into a charitable trust that will be overseen by his three children. They must decide unanimously which causes will be funded and in what amount. While not every client can fund a charitable trust or private foundation, they can still accomplish their philanthropic goals by using a charitable vehicle such as a donor-advised fund.
COMMUNICATION
What is important is that Buffett's estate plan and intentions for the future of his fortune are well communicated to his three children. “Regardless of wealth level, communicating your plan with family/heirs and involving them in its implementation is the best way to ensure its success,” said Malia Haskinsvice president of estate planning at I don't want to.
He is also adamant about leaving many decision-making in their own hands rather than trying to control things from the grave. “I feel very, very good about the values of my three children and I have 100% confidence in how they will do things,” Buffett told the WSJ. By entrusting his children to continue to fulfill the family's philanthropic goals, he is leaving room for them to respond to future changes in the laws and regulations governing charities and updates to the tax law.
While his generosity has been applauded, the decision to fund a charity to be controlled by his children has raised some eyebrows. In particular, the “unanimous” aspect of deciding what causes funding has some questioning whether his three children, who have different philanthropic goals and interests, would be able to agree on how to spend it. the money. Another article points out that the causes supported by Buffett's children are more localized than the more global causes funded by the Gates Foundation.
“While unanimity sounds ideal, in practice it can be a breeding ground for intense conflict and potential litigation in the event of an impasse,” said David Haughton, senior corporate counsel at assets.com. To avoid the potential for conflict and not risk creating a delay in the foundation's funds reaching the end charities, you “need a simple process to get the ball rolling—such as requiring a “rules of thumb” clause. majority” or having a third party to act. as a draw,” added Haughton.
While it doesn't appear that Buffett has any specific clauses written, he still has time to act. “Because the charitable trust that will receive the bulk of Buffett's fortune comes into being upon his death, he can modify the terms of the trust, including how the trustees manage the trust, at any time before he dies. If he observes issues of how children interact with charitable giving philosophies, he can modify the terms of the charitable trust's will to put more handrails on their autonomy,” explained Haskins. Haskins also reminds us that Buffett has said, “However, my sense is that while they (his children) have different programmatic priorities, they have similar principles. … So my hypothesis is that they will be able to reach an agreement on how to allocate resources.”
Intention of the donor
Buffett's decision to leave control in the hands of his children rather than write strict commands about what to do with his money will no doubt continue to be the subject of speculation for some. However, let's not forget some of the benefits of such a choice. Just look at the recent chatter and controversy in the media about charitable trusts and honoring donor intent. In recent months, the two museums have made headlines AND faced public scrutiny for violating or challenging the intended purposes of donor bequests. Indiana's Valparaiso University is in hot water after it announced it wants to sell three of the museum's most valuable paintings worth more than $20 million to fund renovations to its freshman dormitories. A lawsuit was filed arguing that the plan violated the terms of the original gift agreement. Meanwhile, the Orlando Museum of Art is busy trying to modify the limitations of a legacy, asking the court to spend money to acquire new art for maintenance.