Berkshire Hathaway 2013 Annual Meeting Audience Question # 64

More kids are ruined by the behavior of their parents than by the amount of the inheritance

Warren Buffett:

OK. Station 5.

Audience Member:

Hello. I’m Marvin Blum from Fort Worth, Texas, the home to four of your companies.

Warren Buffett:

Absolutely. We love Fort Worth.

Audience Member:

Thank you. We love you, too, and your presence in our community.

I’m an estate planning lawyer, and it’s interesting as we wrap up today to ponder that the Baby Boomer generation is about to pass along the greatest transfer of wealth in history.

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’m asking you, how much is that, and how do you keep from ruining your kids?

Warren Buffett:

Yeah. Well.

I think more kids are ruined by the behavior of their parents than by the amount of the inheritance.

Your children are learning about the world through you, and more through your actions than through your words, you know, from the moment they’re born. You’re their natural teacher, and, you know, it’s a very important and serious job.

And I don’t think… I don’t actually think… that the amount of money that a rich person leaves to their children is the determining factor, at all, in terms of how those children turn out. But I think that the atmosphere, and what they see about them, and how their parents behave, is enormously important.

I would say this: I’ve loosened up a little bit as I go along.

Every time I rewrite my will, my kids are happy because they know I’m not reducing the amount, anyway.

And I do something else that… I find that… which I think is an obvious thing, but it’s amazing to me how many don’t do it.

I think that your children are going to read the will someday… that’s assuming you’re a wealthy person… your children are going the read the will someday.

It’s crazy to have them read it after you’re dead, for the first time. I mean, you’re not in a position to answer questions then unless the Ouija board really works or something of the sort.

So if they’re going to have questions about how to carry out your wishes, or why you did this or that, you know, why leave them endlessly wondering after you die?

So in my own case, I always have my children… I rewrite a will every five or six years or something like that… and I have them read it.

They’re the executors under it. They should understand how to carry out their obligations that are embodied in the will, and they should… also, if they feel there’s anything unfair about it, they should express themselves before I sign that will, and we should talk it over, and we should figure out whether they’re right or I’m right, or someplace in between.

So I do think it’s very important in wealthy families, once the kids are of a certain age. I mean, I don’t advise doing this with your 14-year-old or something, but when they get… you know, certainly by the time they’re in the mid-30s or thereabouts… I think they should be participants in the will.

And I do think that if you get to be very wealthy that the idea of trying to pass on, create a dynasty of sorts, it just sort of runs against the grain, as far as I’m concerned.

And the money has far more utility… you know, the last hundreds of millions or billions have far more utility to society than they would have to make… create a situation… where your kids don’t have to do anything in life except call a trust officer once a year and tell them how much money they want.

Charlie?

Charlie Munger:

I don’t think I want to go into this one.

Warren Buffett:

OK.

Charlie Munger:

And I’m absolutely sure you don’t want to discuss your will with your children if you’re going to treat them unequally.

Warren Buffett:

No.

Charlie Munger:

That is poison.

Warren Buffett:

But there… one of the problems you have… I mean, and what you want to discuss just for that very situation is there may be circumstances where one child will have much more of an interest in one type of asset than others, or something of the sort.

And you want to make sure that your definition of equality, in terms of handling different kinds of assets, meshes, or at least is understood, by the children so that they don’t think the fact that you may gave one a farm and another a house or something of the sort resulted in inequality when you thought it was equality.

Charlie, you got anything?

Charlie Munger:

No. I’m…

Warren Buffett:

He’s staying away from this one.

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