Warren Buffett, the CEO of Berkshire Hathaway and a legendary investor, warned that estate planning could determine the happiness and harmony of family members after your death. 'Time is a winner, but it can also be unpredictable,' the 94-year-old billionaire wrote in a rare candid open letter released on Monday.

Buffett stated that he will again donate a portion of his shares in Berkshire Hathaway (worth about $1.15 billion) to four family foundations. After this donation, he still holds 206,363 shares of Class A stock, worth approximately $148 billion.

As he did last November, Buffett converted 1,600 shares of Class A stock into 2.4 million shares of Class B stock, and then donated these shares to the Susan Thompson Buffett Foundation (named after his late first wife) and a foundation overseen by his children.

Buffett's three children are now in their 60s and 70s, and they need to reach a consensus on how to use their father's money. In new remarks to shareholders, Buffett stated that this requirement will provide some degree of protection for his children, shielding them from bombarding requests. 'I know these three people very well and trust them completely,' he wrote.

Buffett's large position in Berkshire Hathaway means that a rapid sale of his stock could shake the stock price. He wrote that his children should gradually distribute his shares, and the method of distribution 'must never betray the special trust Berkshire shareholders have in Charlie Munger and me.'

Buffett's advice

Talking about death is a difficult topic for many, and planning the distribution of assets is equally troublesome. However, as the world is about to face an estimated $84 trillion in 'massive wealth transfer,' Buffett advocates not to shy away from such unpleasant topics to avoid sowing the seeds of family conflict.

As one of the richest people in the world, Buffett's wealth exceeds $151 billion. He pledged back in 2010 to donate at least half of his wealth to charity. Although Buffett's wealth is beyond the imagination of ordinary people, he offered a piece of advice that applies to all parents:

'Regardless of how much wealth you have, when your children are mature enough, let them read it before you sign the will.'

Buffett believes that the will should be a conversation between parents and children. He suggests that parents explain the logic behind the decisions in the will and the responsibilities that children will have in the future, while also seriously listening to their feedback and adopting reasonable suggestions. He admitted that he has shared the contents of his will with his children over the years and listened to their opinions. He wrote: 'I have no problem defending my thoughts; my father did the same back in the day.'

But in the United States, many people view 'talking about money' as a taboo. According to a Fidelity survey, 56% of Americans say their parents never discussed money with them, but 81% believe that receiving financial education at a young age would be very helpful.

Buffett mentioned that if the will is vague or not communicated with family members in advance, it could lead to family disputes. 'Over the years, Charlie (the late business partner Charlie Munger) and I have seen many families turn against each other after the execution of a will,' he wrote.

Especially when there are biased arrangements among children in the will, this tension may be further amplified. On the other hand, he pointed out that a well-discussed will can help families be more united. He emphasized: 'You don’t want your children to question the decisions in the will with 'why' when you can’t respond.'

Buffett follows a core principle in distributing wealth: 'Super-rich parents should leave their children enough wealth to do anything but not so much that they can do nothing.'

Although he previously donated a large amount of wealth to the Gates Foundation, he recently stated that this funding will no longer go to the Gates Foundation after his death, but will be handled by a new charitable trust fund managed by his three children. Buffett also revealed that he allocated an additional $1 billion to family foundations. He firmly believes that proper planning and open communication can avoid many potential inheritance disputes and help family members better face the challenges brought by the 'massive wealth transfer.'

Berkshire's Class B shares have risen 34% this year, while the S&P 500 index has increased by 26%. Earlier this year, the company joined the U.S. 'club' of companies with a market value exceeding $1 trillion.

Article forwarded from: Jinshi Data