Warren Buffett, the legendary investor and Chairman of Berkshire Hathaway, has some critical advice for all parents — whether they have “modest or staggering wealth.”
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In a detailed letter released recently, Buffett suggested that parents allow their children to read their will before it is signed, ensuring they understand the rationale behind the decisions and their future responsibilities.
“Be sure each child understands both the logic for your decisions and the responsibilities they will encounter upon your death,” Buffett wrote. He emphasised the importance of clear communication, particularly in matters as significant as estate planning, given the potential for misunderstandings after a parent’s death. “If any have questions or suggestions, listen carefully and adopt those found sensible,” he continued. “You don’t want your children asking ‘Why?’ in respect to testamentary decisions when you are no longer able to respond.”
Buffett, who has accumulated a personal fortune of $150 billion, shared this advice in light of the complex dynamics that can arise in families when a will is not transparent. He explained that over the years, he has seen many families torn apart by confusion and anger after posthumous estate decisions left beneficiaries unclear or upset. He noted, “Jealousies, along with actual or imagined slights during childhood, became magnified (in such situations).”
The importance of open conversations
Financial experts agree with Buffett’s stance on discussing estate plans with children. Douglas Boneparth, Founder of Bone Fide Wealth and a certified financial planner, said although such conversations are difficult, they can ultimately strengthen family relationships. “These are tough conversations to have, but they’re meaningful and when approached correctly, can strengthen relationships,” Boneparth said in a conversation with CNBC International.
Boneparth stressed that children should have realistic expectations about their inheritance, which can often be distorted by imagination. “Kids’ imagination can run wild with what they think they should be getting,” he said. By being clear and thorough about who will receive what and why, parents can avoid confusion and potential conflict. Addressing perceived inequities, such as if one child is set to inherit more due to prior financial assistance, is crucial to preventing future disputes, he said.
Navigating complex family dynamics
In some cases, parents may need to have candid conversations with one child about potentially leaving them less if their financial situation is better than a sibling’s. Carolyn McClanahan, Founder of Life Planning Partners and a certified financial planner, recommended broaching this subject with the wealthier child. “Do you really care how I leave our assets? Because your brother is an artist and could use a little more help,” she suggested.
This proactive approach ensures that the more financially comfortable child does not feel slighted when the will is read. McClanahan highlighted the importance of addressing these issues directly to avoid misunderstandings later.
Buffett’s letter also reflected on his own experiences with his father, who engaged in similar conversations with him. “There is nothing wrong with my having to defend my thoughts. My dad did the same with me,” Buffett wrote.
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