Back in 2006, Warren Buffett made the ‘Giving Pledge’ committing to give away in charity 99% of his wealth during his lifetime or at death. Now, 94yrs old, Buffett wrote this letter to shareholders last week sharing his plan to execute this. But typical of Buffett’s letters, this one has its nuggets of wisdom:
“…hugely wealthy parents should leave their children enough so they can do anything but not enough that they can do nothing. Susie and I had long encouraged our children in small philanthropic activities and had been pleased with their enthusiasm, diligence and results. At her death, however, they were not ready to handle the staggering wealth that Berkshire shares had generated. Nevertheless, their philanthropic activities were dramatically increased by the 2006 lifetime pledge that I subsequently made and later expanded. The children have now more than justified our hopes and, upon my death, will have full responsibility for gradually distributing all of my Berkshire holdings. These now account for 99½% of my wealth.”
It comes from his misgivings about intergenerational wealth:
“I’ve never wished to create a dynasty or pursue any plan that extended beyond the children. I know the three well and trust them completely. Future generations are another matter. Who can foresee the priorities, intelligence and fidelity of successive generations to deal with the distribution of extraordinary wealth amid what may be a far different philanthropic landscape? Still, the massive wealth I’ve collected may take longer to deploy than my children live. And tomorrow’s decisions are likely to be better made by three live and well-directed brains than by a dead hand.”
Bufffett’s three children are now 71, 69 and 66.
And he has a suggestion for all parents about bequeathing:
“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. Over the years, I have had questions or commentary from all three of my children and have often adopted their suggestions. There is nothing wrong with my having to defend my thoughts. My dad did the same with me.
I change my will every couple of years – often only in very minor ways – and keep things simple. Over the years, Charlie and I saw many families driven apart after the posthumous dictates of the will left beneficiaries confused and sometimes angry. Jealousies, along with actual or imagined slights during childhood, became magnified, particularly when sons were favored over daughters, either in monetary ways or by positions of importance. Charlie and I also witnessed a few cases where a wealthy parent’s will that was fully discussed before death helped the family become closer. What could be more satisfying?”
And he never forgets to acknowledge the good fortune he has had in life and in amassing this wealth and therefore the need to give back to those who aren’t particularly lucky:
“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.”
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