At age 94, and with a net worth of approximately $147 billion, it is appropriate that Warren Buffett has given considerable thought to his personal estate plan. Just a few months ago, Buffett provided estate planning advice to fellow Berkshire Hathaway shareholders. In this month’s update, I comment on Buffett’s views on communicating an estate plan to one’s family during lifetime. In a subsequent advisory update, I will respond to some of Buffett’s other estate planning suggestions.
About communicating one’s estate plan to family, Buffett writes,
“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.… There is nothing wrong with my having to defend my thoughts.”
Information Disclosed
In most cases, I advise our clients to the following information to adult children:
- Individual Beneficiaries. Disclose the general plan for your remaining assets at death. If you own unique or “indivisible” assets (e.g, land or even sentimental family heirlooms), you should communicate the plan to your children for the distribution of these assets.1
- Charitable Beneficiaries. Disclose the legal directions you have made for charitable giving at death. 2
- Disclose the identity of the “fiduciaries” of your estate plan. If you have chosen a professional trustee or fiduciary, they should be introduced to the adult children.
- Key Advisors. You should introduce your children to your professional advisors, and provide your children with their contact information.
Significance of the Legal Vehicles of your Plan
Buffett suggests that he had his three adult children “read his Will.” But Buffett’s revocable trust, not his Will, is the document that he likely provided to his children for their review. As summarized previously on this advisory update, a comprehensive estate plan includes not just a will, but also beneficiary designations, a revocable trust agreement, and perhaps a tangible personal property list. Just as Buffett doesn’t grasp these distinctions between legal vehicles for transfer, we don’t take issue with our own clients for failing to grasp these legal distinctions. It is critical, however, that our clients are aligned with their advisors as to the identity of the beneficiaries and the fiduciaries so that the legal plan follows suit. The creation of a one-page summary memo, such as the one here, could be type of document by which children “read one’s Will” during lifetime.
Honoring Your Children with Disclosure of the Plan
Buffett invites collaboration with his children, and to adopt sensible suggestions. Your clients might likewise invite collaboration with children, including proposals for changes on unique property dispositions or even the appropriate named fiduciary. But regardless of whether your clients invite collaboration, your client must (i) retain authority over the beneficiary and fiduciary decisions, and (ii) clearly communicate decisions to the family. As noted by Buffett, the disclosure of your estate plan to your children not only honors your children during your lifetime with but also lessens the likelihood of disharmony after your death.
In a subsequent advisory update, I will discuss which of elements of Buffett’s estate plan are best left to Buffett’s fellow billionaires. I am, however, firmly in agreement with Buffett that we should clearly communicate our estate plan to our family.
Leave a Reply