19 Jun How You Can Learn From Warren Buffet’s Estate Planning
How You Can Learn From Warren Buffet’s Estate Planning
By: Barry E. Haimo, Esq.
June 18, 2020
Who wouldn’t want to be a beneficiary in Warren Buffet’s will?
Even though Buffet has announced plans to give away 99% of his wealth, most people wouldn’t mind being part of that remaining 1%. However, Buffet’s directions on how to handle his wealth have caught the attention of shareholders — and not in a good way.
Not for Sale
In Buffet’s 2019 annual letter to shareholders, he shared some insight into his estate planning. The letter says, “Today, my will specifically directs its executors — as well as the trustees who will succeed them in administering my estate after the will is closed — not to sell any Berkshire shares.”
(Buffet intends to give away all of his shares in annual gifts 10 years after his estate is settled.)
This insight deviates from usual policies: trustees are usually encouraged to diversify a trust’s portfolio before it is distributed to beneficiaries.
Although Buffet didn’t dive too deep into his reasoning for his instructions, they were not received well among those who understand the history of estate planning and asset distribution.
Why Is This a Questionable Call?
What’s the big deal here? Who wouldn’t want some Berkshire Hathaway stock?
It’s true that Berkshire Hathaway stock is strong. But that’s largely thanks to Buffet himself. It’s hard to say just what will happen to the conglomerate when Buffet is not making decisions for it anymore. It’s hard to say what will happen to any big company in the next 10 years, especially when you consider the uncertain times we live in today.
In the past, similar directions to executors haven’t gone so well. Stock prices fell and beneficiaries didn’t get what they thought. The money lost eventually resulted in lawsuits.
(Of course, if the stock prices rise, no one is going to complain.)
Will this be the case in Warren Buffet’s estate plan? What will the value of Berkshire Hathaway stock be in 10 years — or 10 years after Buffet’s death? We can’t say for sure. And any amount of uncertainty, especially when there is a lot to lose, is bound to raise some eyebrows.
What This Means for Your Estate Plan
Not everyone is giving away stocks that cost close to $300,000 each. But no matter how big your estate is or how much stock you have to give away, the controversial choices in Warren Buffet’s estate plan can teach you something as you set up your strategy.
You do not know what is going to happen in the year after you pass away — let alone in five or 10 years. What seems like a solid estate plan today may look foolish in the midst of a global catastrophe, economic crisis, or big technological developments.
Talk to an estate planning lawyer about how to create a flexible, yet effective estate plan. Giving your beneficiaries room might help them get the most out of your estate and set up the best lives for themselves after your passing.
Barry E. Haimo, Esq.
Strategic Planning With Purpose®
YOU ARE NOT OUR CLIENT UNLESS WE EXECUTE A WRITTEN AGREEMENT TO THAT EFFECT. MOREOVER, THE INFORMATION CONTAINED HEREIN IS INTENDED FOR INFORMATIONAL PURPOSES ONLY. EACH SITUATION IS HIGHLY FACT SPECIFIC AND EXCEPTIONS OFTEN EXIST TO GENERAL RULES. DO NOT RELY ON THIS INFORMATION, AS A CONSULTATION TO UNDERSTAND THE FACTS AND THE CLIENT’S NEEDS AND GOALS IS NECESSARY. ULTIMATELY WE MUST BE RETAINED TO PROVIDE LEGAL ADVICE AND REPRESENTATION. THIS INFORMATION IS PROVIDED AS A COURTESY AND, ACCORDINGLY, DOES NOT CONSTITUTE LEGAL ADVICE.