Warren Buffett shares details of his Will — Two key lessons you can learn, ‘whatever your wealth level’

When Warren Buffett shares details of his finances, people tend to pull up a chair and take notes. When you’re one of the wealthiest people on Earth, you must be doing something right.

While Buffett’s acolytes are chiefly interested in strategies for amassing more money, they recently received a lesson on how to give it away. Earlier this summer, the Berkshire Hathaway chair shared details of his latest estate plan with the Wall Street Journal.

Buffett still plans to make good on his promise to donate significant portions of his wealth to a handful of charities, including the Bill & Melinda Gates Foundation, while he’s still alive.

When Buffett dies, his remaining billions (much of it in Berkshire stock) will go into a charitable trust overseen by his daughter and two sons. The three must decide unanimously which charitable organizations to donate to and in what quantities.

“I feel very, very good about the values of my three children, and I have 100 per cent trust in how they will carry things out,” Buffett told the Wall Street Journal. Plus, setting things up this way allows Buffett’s beneficiaries to respond to changes in charitable organizations and the laws and regulations that govern them.

“I like to think I can think outside the box, but I’m not sure if I can think outside the box when it’s six feet below the surface and do a better job than three people who are on the surface who I trust completely,” Buffett said.

All joking aside, there is much to be learned from Buffett’s approach to estate planning — even if you don’t have $100 billion, or even $100,000, to give away.

“He’s really shown a lot of forethought. And he’s built in flexibility from the beginning, because it’s evolved,” says Jose Reynoso, head of advanced estate and tax planning at Citizens Private Wealth. “Start early and build in flexibility is a good idea whatever your level of wealth is.”

Why you need an estate plan now

Even if you don’t think you have much to bestow upon your heirs, having an estate plan means you get to decide what happens in the event of your death or incapacitation — not someone else.

“As a general matter, if you do not have an estate plan, the state will provide one,” Reynoso says. That may very well mean health care and financial decisions running contrary to your wishes.

To avoid confusion — and to keep your loved ones out of a lengthy and expensive legal process — you’d be wise to put together a basic estate plan. This might include:

1. Beneficiary designations. Certain financial instruments, such as investments, bank accounts and life insurance policies, allow you to designate a beneficiary who receives the contents of your account upon your passing. These designations typically supersede a will, so it’s essential to keep them up to date, especially following major life changes, experts say. Failure to do so is “the No. 1 mistake most people make” with investment accounts, Ed Slott, a certified public accountant and founder of IRAHelp.com, previously told Make It.
2. Simple will. A will designates how you want your assets to be distributed in the event of your death. This is an easy one to draw up — templates can be found for free on websites such as LawDepot.com. “A will is a simple slam dunk for most people,” Sheryl Garrett, a certified financial planner and founder of the Garrett Planning Network, told CNBC in 2022.
3. Powers of attorney and advance directives. These can go by different names in different states, but the general gist is that they lay out your wishes and allow you to designate a decision-maker for you should you become incapacitated.

Of course, things can get more complicated from there, and you’d be smart to consult an estate attorney to see what might work best for you. It may make sense to set up a trust, just like Buffett.

The important thing to have in common with the billionaire, however, is the process: starting early and communicating often.

“It’s a well thought out and communicated plan among the family,” Reynoso says of the publicly available information from Buffett’s plan. “That communication can help avoid issues that can come up down the line.”

How to estate plan like Buffett

If you, like Buffett, want a significant amount of your wealth to go to charity after you pass, you’d traditionally set up a charitable trust (like Buffett has) or a private foundation. However, these are costly options typically reserved for the very wealthy.

Luckily, you can achieve a plan similar to Buffett’s through a charitable account called a donor-advised fund.

“So many Americans need to learn about these, and a lot of them still don’t understand them,” says Nicholas Yeomans, a certified financial planner, estate planning specialist and president of Yeomans Consulting Group. “A donor-advised fund is an excellent, low-cost way to bless the organizations that you care about.”

Here’s how they work, in a nutshell.

A donor-advised fund is an account that you control whose funds are earmarked for charitable giving. You typically open a DAF with a community foundation or through the charitable arm of a brokerage firm, such as Vanguard or Schwab, and there’s often no minimum deposit.

You can deposit assets, including cash, real estate and stock, into these accounts and, as the donor, choose how to invest the assets and where to donate them.

The major draw, for living donors, is that you can get immediate tax deductions for donating to the fund, but can decide where the money goes later down the road. Should you die before deciding, a named successor can take over your account.

Plus, if your fund contains appreciating assets, such as Berkshire Hathaway stock, neither you nor the charity of your choice owes capital gains tax when you donate.

It’s a vehicle that is perfect for someone looking to emulate Buffett’s model on a smaller scale, says Yeomans. Naturally, it’s always a good idea to talk to an estate planner or other financial professional before setting up such an account.

“You can fund [a DAF] while you’re alive, but you can also fund it at death. And what’s cool about it, is that it can give indefinitely,” Yeomans says.

That means you could set up multiple funds for your children to direct toward charitable causes of their choosing after you’re gone, says Yeomans. Or you could make receiving other parts of an inheritance contingent upon deciding where money in the DAF goes as a family — kind of like the Buffett setup, but simpler.

″[Your DAF] can be perpetually giving to those churches, charities, museums — the things that you care about,” says Yeomans. “It doesn’t have to have a separate tax ID number. It doesn’t have a board of trustees. It doesn’t have to have all the stuff that can take away from that money and be complicated and convoluted if you’re just someone in middle America looking to make an impact.”