Last week’s post was dedicated to the wisdom of Warren Buffett’s longtime sidekick Charlie Munger who died in late 2023 at age 99. Today’s post looks ahead to 2024 and the next annual meeting without Munger. Although Charlie is irreplaceable and we’ll miss his sharp intellect and wit, the show must go on. Our family has already booked our annual pilgrimage to Omaha for this year’s annual meeting on May 3-5. Come join us!
In anticipation of the upcoming “Woodstock for Capitalists” (as the annual meeting is commonly dubbed), I’ll share a few tidbits of wisdom from the Oracle of Omaha. Previous posts have described much of Warren’s estate planning philosophy. Today, let’s dive deeper into Buffett’s estate plan, as many join me in finding it to be instructive.
The Oracle of Omaha revealed in his 2020 annual letter to shareholders that his Will directs his executors “not to sell any Berkshire shares.” Furthermore, after the estate closes and the shares transfer to trusts, the trustees are likewise directed to sell no Berkshire stock. Over the 12 to 15 years following his death, they are to gradually convert portions of A shares into B shares and distribute them all to various foundations.
Buffett acknowledges that absent such explicit direction, state law would require his fiduciaries to diversify assets. Accordingly, “my Will also absolves both the executors and the trustees from liability from maintaining what obviously will be an extreme concentration of assets.”
Buffett believes that holding Berkshire stock during the 12 to 15 years disposal period will enrich his estate better than an upfront sale and reinvestment in US Treasury bonds. Although perhaps not the “safe” course, “there is a high probability that [his] directive will deliver substantially greater resources to society.” As he later expounds in a Nov. 2023 Berkshire news release, “Berkshire’s advantage is that it has been built to last.”
Here’s the lesson from Buffett’s “Berkshire-only” instructions. If you own a family business, real estate, or certain other investments that you want preserved in your trust, spell it out in your estate plan. Otherwise, state law will likely force your trustees to liquidate and diversify.
Interestingly, Buffett’s estate plan doesn’t delay making charitable gifts until his death. In a Berkshire news release in June 2023, Buffett announced that over the last 17 years, he has gifted about $50 billion of Berkshire stock to five foundations as part of a plan for annual grants he adopted in 2006. By far the largest recipient is the Bill and Melinda Gates Foundation. Buffett confirmed that the plan will continue after his death: “My Will provides that more than 99% of my estate is destined for philanthropic usage.” In the Nov. 2023 news release, he offers further wisdom on the reason for his philanthropy at death: “My children, along with their father, have a common belief that dynastic wealth, though both legal and common in much of the world including the United States, is not desirable….Private philanthropy will always have an important place in America.”
As previously reported, I’ve had the privilege of asking Buffett estate planning questions at three Berkshire Hathaway annual meetings. Each time, Buffett stresses the importance of raising kids, especially affluent kids, with solid values. Per Buffett, the best way for parents to build a lasting legacy is being role models who live those values themselves. He advises that kids are watching their parents more than they are listening to them.
Since the kids are watching, Buffett cautions against living an extravagant lifestyle, even if there’s great wealth. Worth about $115 billion as the world’s seventh richest person, Buffett takes that value to the extreme, to the point of being considered “frugal.” According to a Business Insider article last July 14th, “Bill Gates, a longtime friend of the 92-year-old, once recalled the billionaire pulling out a handful of coupons to pay for a McDonald’s meal.” Moreover, Buffett still lives in the same Omaha house he bought for $31,500 in 1958.
That frugality spills over to Buffett’s family. That same Business Insider article reported that at a summer summit for billionaires in Sun Valley, Idaho, Warren’s wife Astrid Buffett was overheard griping to resort employees about having to pay $4 for a cup of coffee. She complained that she could buy a whole pound of coffee for that price. Astrid was working as a waitress at the French Café in Omaha when she first met Warren. They married in 2006, and it’s evident she embraces her husband’s views on conservative spending.
For all those who cling to every story and piece of advice we can glean from the Oracle, Buffett is certainly a gift that keeps on giving.
Marvin E. Blum
Marvin Blum (left) with son Adam, part of the “Warren Buffett Fan Club” that welcomes all tidbits of wisdom from the Oracle of Omaha.