I’ve never had the pleasure of meeting Marvin Blum. But if I ever do, I’d like to shake his hand. Mr. Blum is a tax and estate lawyer from Fort Worth, Texas. On May 5, at the Berkshire Hathaway annual general meeting, Mr. Blum asked Warren Buffett a question about estate planning.
Here are his exact words:
“I can design plans that eliminate estate tax and pass down great amounts of wealth to the next generation. But many of my clients come to me and say they want a plan like Warren Buffett’s, leaving their kids enough so they can do anything, but not so much that they can do nothing. Now they ask me – and I am asking you – how much is that? And how do you keep from ruining your kids?”
This is a question I hear again and again in my meetings with clients and the Tiger 21 groups I talk to in Canada and the U.S.
Buffett’s answer was balanced and well considered. I think it can teach everyone a lot about estate planning – no matter what your net worth.
“I think that more of our kids are ruined by the behaviour of their parents than by amount of the inheritance.”
This was the first sentence of Buffett’s answer, and it’s very true: if you want to make sure your kids don’t grow up to be spoiled brats, focus less on the structure of your estate and more on the environment they grow up in.
“I’ll say this: I’ve loosened up a little bit. Every time I rewrite my will, my kids are happy, because they know I am not reducing the amount.”
I read a number of years ago that Buffett intended to leave his children very little wealth.
Clearly his thinking has evolved, and I’m glad to hear it. I’ve seen a number of situations where children become bitter and resentful because they feel they haven’t been treated “fairly” in their parents’ wills.
“Your children are going to read the will someday. … It’s crazy for them to read it after you’re dead for the first time. You’re not in a position to answer questions unless the Ouija board really works or something of the sort.”
I love Buffett’s quip here. Too often, privacy leads to disaster, with family members bickering and fighting with each other to settle scores and right perceived wrongs. Far better to have a conversation (even if it’s uncomfortable), so you can explain your intentions and hopefully avoid problems before they begin.
“I rewrite my will every five or six years …”
I’m still amazed at how many people write a will and let it sit in their safety deposit box for 20 years. As Buffett’s thinking on inheritance has evolved, so has his will. Hopefully others will follow his lead.
“I do think it is very important in wealthy families once the kids are a certain age … they should be participants in the will.”
An interesting way to look at the estate planning process: as a family responsibility. More and more wealthy families share this perspective, particularly business owners, who need to be very clear about family business succession.
“I do think that if you’re very wealthy … the money has far more utility to society than to create a situation where your kids don’t have to do anything in life except call a trust officer once a year and tell him how much money they want.”
A very clear articulation of how Buffett views charity as a “responsibility to society.” I agree with him wholeheartedly, as do most of the HNW individuals I know.
