Original Liu Xiaobo
Warren Buffett, who is about to turn 94, announced that he would make major changes to his will.
Previously, Buffett had promised that most of his estate would be donated to Bill Gates' charitable foundation after his death. The latest statement is that after his death, there will be no more funds to go to the Gates Foundation; The $130 billion estate will be left to a new charitable trust fund jointly managed by his three children.
The reason for such a significant change is to "see the children become more mature".
Buffett stressed that he is very happy with the values of his three children and has 100% confidence in how they handle things.
Warren Buffett's three "maturing children" are 71, 69, and 66 years old this year.
The eldest sister, Susan, 71, is the president of the Susan Thompson Buffett Foundation, which funds reproductive rights and college scholarships, in addition to the foundation she commands with her name.
The second eldest Howard Buffett is 69 years old and works in agriculture. So his Howard The G. Buffett Foundation focuses on food security while also taking into account goals such as combating human trafficking.
Peter Buffett, the third elde, is 66 years old and a musician. He manages the Novo Foundation, which grants projects including partnerships with Indigenous communities.
The eldest and second are currently members of Berkshire's board of directors.
Seeing this, you will probably think of Kangxi's abolished prince Yinren, who has been a prince for more than 40 years and cannot take over, and once privately sighed, "In ancient times, how can there be a prince for 40 years?"
And Buffett's three children survived until they were sixty or seventy years old before they received their father's evaluation of "more mature" and "correct values", and the huge inheritance finally does not need to be given to outsiders!
Warren Buffett's latest decision also makes people sigh: wealth is passed on within the family and between generations, which is more in line with human nature. This is true even if it is used for charity.
Why did Warren Buffett suddenly figure it out? Changed his statement that he donated most of his wealth to charities managed by outsiders?
Before answering, let's briefly review Buffett's history of philanthropic giving.
When Warren Buffett was 75 years old, in 2006, he made the decision to donate most of his wealth to the Gates Foundation.
At that time, Buffett's net worth was $44 billion, and the promised donation was $30 billion.
However, Buffett is making money too quickly, and the A-shares of Berkshire Hathaway, which he helms, were about $80,000 in 2006 and are now about $610,000 per share.
So Buffett didn't default on the Gates Foundation, he promised to donate $30 billion, and he actually donated $39.3 billion over the years. Together with donations to other charities, the total donation exceeds $50 billion.
It's just that Buffett's previous statement was to donate most of his legacy to foundations outside the family, and now he has donated it to a charitable foundation jointly managed by his three children.
According to Buffett's letter published on Berkshire Hathaway's official website, after making a new round of donations ($5.5 billion), his personal holdings of the company's A shares are worth about $127 billion, accounting for about 99.5% of his net funds, and he has no debt.
The first important reason why Buffett changed his mind was that Gates divorced, and the internal and external environment of the foundation has undergone major changes. After Gates' divorce, Warren Buffett announced his resignation as a trustee of the Gates Foundation, and Gates' ex-wife Melinda also announced her resignation from the Foundation.
The second reason may be that as he gets older, Buffett cares more about his children and grandchildren. I have a few charitable foundations at home, so why donate most of my money to other people's charitable foundations? Don't even have a naming right?
For any wealthy person, there is the question of the inheritance of wealth. In the United States, there are generally the following ways to play:
The first is to pay inheritance tax directly and divide the money among the children.
The United States has a relatively high inheritance tax, with a tax rate of 18% to 50%. If the amount of the estate is greater than $2.5 million, the tax rate is 50%. So, if Buffett's $130 billion is divided equally among the three children, he will probably pay $65 billion in taxes, and then the three children will each share $21.67 billion.
It's the easiest way, but it's probably the stupidest way.
Because after the children and grandchildren have acquired a huge amount of wealth, they may not be able to hold on to it, and they will quickly spend most of the money, and even bring some negative effects. If the defeat is fast, it may be about the same in 20 years. If you've ever been to the Humble Administrator's Garden in Suzhou, you'll know that the most beautiful private garden in China has been lost to outsiders at the gambling table in the second generation.
The second is to set up a family trust, entrust professionals to take care of it, set the distribution principle, control the speed of squandering by children and grandchildren, and try to prolong the time of future generations. Just like the wishes in the bronze inscriptions of the Western Zhou Dynasty, the descendants will use it forever.
Third, the establishment of a family charitable trust to provide children and grandchildren with a long-term decent social identity and basic economic security through charity.
Compared with the second way, the third way better takes into account "social welfare + founder prestige + the interests of children and grandchildren".
In the third model, the estate is tax-deductible, but 5% of the net worth is donated annually to charity, which can enhance the prestige of the entire family, especially the "posthumous name" of the main creator of wealth. At the same time, allowing children to work in charitable foundations, supervised by outsiders, and managed by professionals, can give their children and grandchildren a long-term decent social identity and basic income security. Prevent them from squandering and losing money quickly because they have obtained a huge fortune in a short period of time.
On the Internet, you can often see an explanation: the reason why the wealthy in the United States have set up family charitable trusts is to avoid inheritance tax. This explanation is a bit biased, although they avoid the 50% inheritance tax, but they have to pay a "gift tax" of 5% every year, which is not cost-effective from an economic point of view.
In addition to giving back to the society, one of the main reasons why the wealthy want to set up a family charitable trust fund is to prevent their unscrupulous children from losing their families too quickly and not even having a decent social status and a place to eat in the future.
Warren Buffett's legacy is about $130 billion, and if the stock is discounted after his death, there is still $100 billion, and at the rate of zero annual income and 5% decay (for donations), there will be $4.6 billion left in 60 years.
If it can increase in value by 3% per year, minus 5% of the endowment, and decay by 2% per year, there will be nearly $30 billion in 60 years, and there will be no problem for blessings for generations.
There are many ways to set up family charitable foundations in the United States, the most traditional way is to set up a non-profit legal person, that is, a model with relatively high "charitable gold content"; In addition to this, there is also the LLC structure, which is the LLC structure. Among them, the benefits of family members are arranged with different strengths.
In addition, there is a distinction between a Charitable Remainder Trust and a Charitable Lead Trust. The former gives priority to private interests, and after the death of the designated family beneficiary or after a period of time, the remaining property is used for public welfare and charitable goals; The latter gives priority to public welfare, and after the public welfare goal is achieved or after a period of time, the remaining property is used for distribution among family members. And all that.
It is not clear how the Buffett Family Future Charitable Trust will be established. His will stated that more than 99% of the estate was "destined for charity".
He said that in addition to the charitable trust fund already in place for his three children, he would set up another one, which would be jointly managed by his daughter Susan Buffett and his two sons, Howard Buffett and Peter Buffett. The three of them must unanimously decide what to do with the money in this foundation. The three children are the executors of his will and the appointed trustees of the charitable trust.
Warren Buffett also recently publicly stated that when he is "gone", Berkshire's next CEO, 62-year-old Greg Abel, will be solely responsible for the final investment decisions.