Warren Buffett has advice for parents on inheritance planning
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- Warren Buffett shared advice on discussing inheritance with children in a nearly 1,500-word letter.
- Buffett suggested parents read their wills to children before they're signed.
- He said doing so can avoid driving a family apart and can even bring them closer together.
Warren Buffett is sharing wisdom for parents: talk to your kids about their inheritance — before it's too late.
Along with his annual Thanksgiving gift to four of his family's foundations, the 94-year-old investor and Berkshire Hathaway CEO published a nearly 1,500-word letter about how he plans to allocate his billions.
In the letter, he reiterated the belief shared by him and his late wife Susan Buffett that "hugely wealthy parents" should leave their children with enough money to "do anything but not enough that they can do nothing."
His children, Howard, Peter, and Susan, won't inherit the sum of his fortune but will be in charge of donating 99.5% of it.
Buffett also left a suggestion for parents that applies to those of "modest" wealth.
"When your children are mature, have them read your will before you sign it," Buffett wrote. "Be sure each child understands both the logic for your decisions and the responsibilities they will encounter upon your death."
Buffett said parents should hear out their children's questions or suggestions and make changes as reasonable. He added that all three of his children have asked him questions about their inheritance and he often adopted their requested changes.
"You don't want your children asking 'Why?' in respect to testamentary decisions when you are no longer able to respond," Buffett wrote in the letter.
The CEO said that he's witnessed "many families driven apart" because of a will that played on childhood jealousies, left certain people confused and angry, or played on childhood jealousies. Conversely, he said he's seen families become closer when the will is shared in advance.
For context, the most recent Federal Reserve data collected from 2016 to 2019 indicates the average American inheritance is $46,200 — much less than the $10 million Buffett's late wife left for her children.
Buffett also shared details about the unanimous vote provision he included in his will. The clause requires his three children to approve all donation decisions after his death.
"I've explained that my children will forever be besieged with earnest requests from very sincere friends and others," Buffett wrote in the letter.
But Buffett said his children will forever be regarded as "targets of opportunity" — and them saying no to donation pleas won't always make the requests go away.
Buffett said the unanimous provision provides "an immediate" and definitive response to grant-seekers, allowing them to say, for example, "It's not something that would ever receive my brother's consent."
Buffett said the clause isn't a remedy for all families, as it wouldn't work for a large group of children, and it doesn't remove the children's responsibility to choose where to donate billions. Still, he said it would help improve their lives.
Buffett remains one of the wealthiest people in the world with a $150 billion net worth, Forbes estimated. Along with Melinda French Gates and Bill Gates, Buffett founded the Giving Pledge, a commitment for the world's billionaires to give the majority of their wealth towards philanthropy.
Buffett reiterated his philanthropic philosophy in the letter highlighting his children's growth into "good and productive citizens." He joins a number of other business leaders, like Bill Gates and Michael Bloomberg, who prioritize philanthropy over solely allocating their fortunes to their heirs.