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Warren Buffett said he would donate $1.2 billion worth of Berkshire stock to family foundations.
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The investor also wrote a mini-letter to shareholders of almost 1,500 words.
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Buffett spoke about his estate planning, his children, his happiness in life and philanthropy.
Warren Buffett surprised shareholders Monday with a nearly 1,500-word letter in addition to his usual Thanksgiving gift to four of his family’s foundations.
The famed investor and CEO of Berkshire Hathaway said he would soon convert 1,600 of his Class A shares into 2.4 million Class B shares, worth about $1.2 billion.
He promised to distribute 1.5 million of those shares to the Susan Thompson Buffett Foundation – named after his late wife – and 300,000 shares to each of his three children’s foundations: the Sherwood Foundation, the Howard G. Buffett Foundation and the NoVo Foundation.
In his unexpected letter to Berkshire shareholders, Buffett said the gifts would reduce his personal stock to 206,363 Class A shares, worth $149 billion. He has now given away 56.6% of his shares since pledging 99% of them to charities in 2006.
The “Oracle of Omaha” said that he and Susan Thompson Buffett owned 508,998 Class A shares at the time of her death in 2004.
All else being equal, if Buffett still owned all those shares, they would be worth $367 billion. That would make him the richest man in the world and richer than Elon Musk, who is worth an estimated $348 billion, according to the Bloomberg Billionaires Index.
Buffett said his late wife’s estate was worth about $3 billion and that 96% of that went to the couple’s foundation. She gave $10 million to their three children – Howard, Susie and Peter – which was “the first major gift we had given to any of them,” he said.
“These donations reflected our belief that enormously wealthy parents must leave enough behind their children to do so something but not enough they can do Nothing,” wrote Buffett.
The legendary stock picker reiterated comments earlier this year that he now believes his children are ready to take on the enormous responsibility of distributing his Berkshire shares, which make up 99.5% of his wealth.
But he acknowledged that his children, now in their late 60s and early 70s, may not be able to stake his fortune before they die. “And tomorrow’s decisions will probably be better made by three living and well-directed brains than by a dead hand,” Buffett wrote.
“As such, three potential successors have been identified. Each is well known to my kids and makes sense to all of us. They are also a little younger than my kids,” said Buffett, adding that they are “on the waiting list.” and that he hoped that his children could cash out all his assets.
Buffett explained why the foundation that manages his wealth after he dies needs a unanimous vote for any action it takes. The investor said his children would be inundated with requests and the policy would ensure the money is used wisely. Additionally, if someone says no to a request for a gift, they can avoid follow-up questions by firmly stating that their siblings would never approve.
The billionaire also gave some advice on passing on wealth.
“I have one more suggestion for all parents, whether they are modest or staggeringly wealthy,” he said. “If your children are adults, have them read your will before you sign it.”
Involving them in the process ensures they understand your logic and their responsibilities, Buffett said.
In the letter — compared briefly to Buffett’s famous annual letter, which was more than 6,000 words this year and more than 13,000 words previously — Buffett reflected on how lucky he was to have been born a white man in the US. He added that his two sisters, Doris and Bertie, grew up with fewer opportunities than he did.
Buffett said he was confident he would become rich early in life, but never dreamed of the wealth that has become achievable in the U.S. in recent decades.
“It was mind-boggling – beyond the imagination of Ford, Carnegie, Morgan or even Rockefeller,” he said. “Billions became the new millions.”
Buffett said, “The real action of compounding is in the last twenty years of my life. By not treading on banana peels, I am now left at 94 with enormous amounts of savings – call these units of deferred consumption – that can be passed on to others who were given a very short straw at birth.”
The investor said he and both his wives believed in equal opportunity at birth and did not find conspicuous consumption “admirable.” He added that he was happy that so many of his shareholders had donated their wealth to society.
Buffett also said that his children shared his and his siblings’ values. Although they are “financially comfortable,” they are not “worried by wealth,” he said, adding, “Their mother, from whom they learned these values, would be very proud of them. Just like me.’
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