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2014: Why has Buffett instructed his wife's trustee to invest in a low-cost S&P 500 index fund instead of Berkshire upon Buffett's death?
CAROL LOOMIS: This question comes from Jason Rothman (PH) of Oklahoma City, who was the first shareholder to ask a question that subsequently was framed by a number of other shareholders as well.
In my mailbox, this was the most popular question asked.
“Mr. Buffett, you state in your annual letter to shareholders that in your will you have given instructions to the trustee who will be acting for your wife’s benefit to put 10 percent of the cash given her in short-term government bonds and 90 percent in a very low-cost S&P 500 index fund.
“My question is why are you advising the trustee to put 90 percent of the cash into an S&P 500 index fund instead of into Berkshire shares?”
WARREN BUFFETT: Well —
CAROL LOOMIS: “This might imply that you expect the index fund to outperform Berkshire in the future when the company is run by a new CEO and chairman. Please clarify.”
WARREN BUFFETT: Yeah, I’ll be glad to clarify. That letter didn’t come from Vanguard, by any chance, did — (Laughter)
When I die, incidentally, then all the Berkshire shares I have at that point will go to five different foundations. Every single share. I mean, there are no shares that have not been designated, mentally, to charity. A good many of them have been designated specifically to — in numbers and all that.
But — and they will be distributed over the ten years after my estate is closed. So figure over 12 years.
And I tell my — I tell the trustees that will be holding these shares, you know, “Don’t sell any Berkshire shares until they have to be sold.”
So my views, on Berkshire at least through 12 years after my death are as bullish as anybody could possibly come up with.
And incidentally, without those kind of instructions, anybody would say, “You know, you’re crazy to keep many, many billions of dollars all in one stock.” I can’t think of anything better to do it over those 12 years.
In terms of my wife’s situation, you know, that is not a question of maximizing capital. It’s just a question of total, 100 percent peace of mind on something that cannot get a bad result.
And, like I said, there’s way more money for her than she’ll ever use. As a matter of fact, those of you who know her, you know, may feel that I’ve added about three zeros too many.
But it is not designed for her to get even larger amounts of capital. And there’ll be capital, loads of capital left over on that part of it.
On the part that I care about maximizing, I have instructed the three trustees to not sell a single share until it has to be sold. So, that’s good for 12 years after I die, as to my best advice as to what I want them to hold.
CHARLIE MUNGER: Well, Warren is a little peculiar in the way he distributes money in the family. And I think he’s entitled to do what he damn pleases. (Applause)
WARREN BUFFETT: Do I — do I hear my — children applauding? Do I hear my children applauding? (Laughs)
CHARLIE MUNGER: And I’ve never had this feeling I had to starve the family down to a few trifles.
And Warren really — and Susie, when she was alive, was the same way.
He really is a meritocrat. He’s really quite extreme in wanting to let most of his money go back to the civilization in which it was earned.
I like being associated with it. (Applause)