Talking about death isn’t easy — which is exactly why so many people avoid planning for it. But the truth is, avoiding estate planning doesn’t make the inevitable any less real; it just leaves your loved ones unprepared. Your financial legacy doesn’t end with you; it shapes the future for those you care about most.
Discover More: The Estate Planning Secret the IRS Doesn’t Want You To Know, According To John Liang
For You: How Much Money Is Needed To Be Considered Middle Class in Your State?
If you’re unsure where to begin, consider taking a cue from one of the most successful investors and money makers in current history: Warren Buffett. With a net worth estimated at $141 billion and a reputation for long-term financial wisdom, Buffett’s approach to estate planning is worth paying attention to.
In a letter to his shareholders, Buffett discussed his estate planning method and underscored the importance of transparency and feedback from prospective heirs. He wrote, “When your children are mature, have them read your will before you sign it.” The Oracle of Omaha, as Buffett is admirably known, went on to highlight five reasons why it’s so important that your kids have a say in your will.
If Your Children Are Good People, They Deserve It
Buffett imparted a golden nugget of wisdom that any parent passing down generational wealth should contemplate: “Leave children enough so they can do anything but not enough that they can do nothing.”
Buffett went on to say that he and his late wife, Susie, encouraged their kids to be philanthropic. Their kids did just as their parents wished, and with gusto and intelligence.
“At [Susie’s] death, however, they were not ready to handle the staggering wealth that Berkshire shares had generated,” Buffett wrote. “Nevertheless, their philanthropic activities were dramatically increased by the 2006 lifetime pledge that I subsequently made and later expanded.”
Buffett shared that he and Susie’s children have exceeded their parents’ expectations. As such, upon Buffett’s death, they will take the reins of his empire, “gradually distributing all of my Berkshire holdings,” Buffett wrote. “These now account for 99½% of my wealth.”
Read Next: The $50 Mistake Warren Buffett Says Everyone Should Avoid
If They’re Lucky, Kids Get Old Too
Another salient reason for kids to have a say in your will arises as they advance in age. If you’re getting older, they’re getting older, too. Buffett’s kids are now all of full retirement age.
“I’ve never wished to create a dynasty or pursue any plan that extended beyond the children,” Buffett said. “… the massive wealth I’ve collected may take longer to deploy than my children live. And tomorrow’s decisions are likely to be better made by three live and well-directed brains than by a dead hand.”
Buffett appointed three potential successor trustees.
“Each is well known to my children and makes sense to all of us,” Buffett wrote. “They are also somewhat younger than my children. But these successors are on the waitlist. I hope Susie, Howie and Peter themselves disburse all of my assets.”
Prepare Your Heirs
People who are about to receive a life-changing inheritance need to know what they’re in for and what wishes come with the inheritance. In Buffett’s case, he wants all foundation actions his children make to require a unanimous vote, meaning all three must agree.
“How can this be workable?” Buffett wrote. “I’ve explained that my children will forever be besieged with earnest requests from very sincere friends and others. A second reality: When large philanthropic gifts are requested, a ‘no’ frequently prompts would-be grantees to ponder a different approach — another friend, a different project, whatever. Those who can distribute huge sums are forever regarded as ‘targets of opportunity.’ This unpleasant reality comes with the territory.”
With the “unanimous decision” provision, each heir mustn’t make a big move without their siblings’ consent. Though this helps, it doesn’t seal off all exposure to headaches. For example, “it doesn’t solve the daunting problem of intelligently distributing many billions annually,” Buffett wrote. But it can help, and it’s important that each of Buffett’s heirs understand what’s to come.
Your Children Should Know Your Logic and Their Responsibilities
We’ve all seen the movie(s) where the son or daughter expects a windfall from their wealthy parents and then is shocked to learn that they were removed from the will. Or, the reverse: A down-and-out guy finds out a mysterious relative has died and left him a million dollars. Maybe you’ve even encountered scenarios like this in real life. They make for exciting, dramatic stories and totally dysfunctional realities.
Your kids and other heirs should understand the thinking behind your final wishes, along with whatever responsibilities come with it.
“Be sure each child understands both the logic for your decisions and the responsibilities they will encounter upon your death,” Buffett wrote. “If any have questions or suggestions, listen carefully and adopt those found sensible. You don’t want your children asking ‘Why?’ in respect to testamentary decisions when you are no longer able to respond.”
You Never Know When Your Time Here Will Be Up
There’s a sense that Buffett’s heart was not only full, but heavy when he penned this letter to shareholders discussing his decision to reduce his Berkshire Hathaway Class A shares. We see this particularly in the beginning, when he spoke of his first wife, Susie, who died in 2004.
“For decades, we had both thought that she would outlive me and subsequently distribute the vast majority of our large fortune,” Buffett penned. “That was not to be.”
Buffett, who will turn 95 this year, did not shy away from the inevitable fate that every mortal being faces.
“Father Time always wins. But he can be fickle — indeed unfair and even cruel — sometimes ending life at birth or soon thereafter while, at other times, waiting a century or so before paying a visit,” Buffett wrote. “To date, I’ve been very lucky, but before long, he will get around to me.”
Caitlyn Moorhead contributed to the reporting for this article.
More From GOBankingRates
- 7 McDonald's Toys Worth Way More Today
- 4 Companies as Much as Tripling Prices Due To Tariffs
- I'm a Retired Boomer: 6 Bills I Canceled This Year That Were a Waste of Money
- How Far $750K Plus Social Security Goes in Retirement in Every US Region
This article originally appeared on GOBankingRates.com: 5 Reasons Why Warren Buffett Says Your Kids Should Have a Say in Your Will
