2023: Never write a will without input from your children.

AUDIENCE MEMBER: Hello. I’m Marvin Blum, an estate planning lawyer from Fort Worth, Texas, home to many of your companies. In fact, Warren, I met you at the memorial for our beloved Paul Andrews, who was manager of TTI. I’d like to get your thoughts on a widespread problem in the world of estate planning.

And that’s the failure of most parents to prepare the next generation for the inheritance coming their way. In particular, if the estate includes a family business, most parents fail to do business succession planning to plan for who’ll run the business on the day when, not if, the founder is no longer there to run it.

The kids aren’t prepared, unlike the other King Charles, not King Charlie Munger, (Laughter) who has been preparing for his job as King of England now for more than 70 years. I sometimes describe the situation like this: Picture a football game. At one end of the field is a quarterback.

He has great skills; he throws a beautiful pass to the other end of the field. And at the other end of the field are the receivers. They’ve never been to a practice, they don’t know the rules of the game, they don’t know how to work together as a team. They’re clueless. So, the quarterback is the patriarch and the matriarch. The football is the inheritance or the family business, and the receivers are the kids. So, what are the odds that they’re going to catch the football and go score a touchdown? Probably only around 10%.

WARREN BUFFETT: I have the picture. (Laughter) (Applause) Just because of my age, and to some extent because of things like the giving pledges, I probably observed as many particularly wealthy families, the problems, and they all are very particular to the family.

And in my family, I do not sign a will until my three children have read it, understand it, and made suggestions. Now, my children are in their 60s and that would not have been a great success if I’d done the same thing in their 20s. It depends on the family; it depends on how the kids feel about each other.

There’s all kinds of things. Depends on the kind of business you have. So, there’s a thousand variables. But I do think that if the children are grown, and when the will is read to them, it’s the first they’ve heard about what the deceased thought about things, the parents have made a terrible mistake.

And I’ve run into all kinds of situations, and some people don’t tell their children anything, and some of them try and get them to bend to their will by using their own personal will. They make a million mistakes. And that’s one you don’t get to correct. Well, Charlie’s had a lot of experience too with the —

CHARLIE MUNGER: Well, at Berkshire we have a simple problem of estate planning. Just hold the goddamn stock. (Laughter)

WARREN BUFFETT: Well, (Applause) but that doesn’t fit everybody, Charlie.

CHARLIE MUNGER: No, it only fits 95%. (Laughter)

WARREN BUFFETT: I don’t know necessarily whether if you have billions of dollars, you want to leave it to all of your children. I mean, that’s something —

CHARLIE MUNGER: Well, that’s another question. But if you’re going to place it somewhere, I’d just as soon have Berkshire stock.

WARREN BUFFETT: Yeah, oh, you’re solving the investment problems one. But you have the personal problem of the fact that when they were four, one of the kids pulled the other kid’s cat’s tail or something like that. I mean, you’re dealing with human beings.

And the biggest thing you want is you want your children to get along. And you want that all through your life, and the estate isn’t the only place where you can mess that up. But I mean, I know a number of cases where the people did not know what was in the will where there were huge sums involved.

And you know, within about 15 minutes each one of them had a lawyer, and you know, they don’t get along since. It’s important to handle it target. And if you want your kids to have certain values, it’s important that you live those values. It’s important that you talk about it to them. (Laugh)

They’re learning from you from the day they’re born, what you’re really like. And don’t think that a cleverly drawn will substitute for your own behavior in teaching your kids the values you hope that they will have. And then your will should be in conjunction with that.

And they grow older, and then they learn to pass along their values in connection with the size of the estate. If there’s family farms it’s one thing, if it’s a bunch of marketable securities it’s something else.

But I know one instance by a particularly rich fellow that once a year he’d get his kids together, and have a dinner, and do all kinds of things to get them to sign their income tax returns in blank, because he didn’t want them to know how much money they had and everything.

Well, that isn’t going to work. I mean, I don’t know necessarily what would’ve worked with him. But Charlie and I have said, if you want to figure out how you want to live your life, you write your obituary and reverse engineer it. You know, and Paul Andrews incidentally, who you mentioned at TTI, lived as great a life as anybody I’ve known.

And he thought about these problems, and he came to me. He was 61, I think, had all the money way beyond what he needed. He liked to give it to people. He had all kinds of good things he wanted to do. And he said, “For a year I’ve been worried about my business, TTI.”

And he said, “I have all the money I need. The family has all the money they need. But what do I do with the business? These people have helped me throughout my life.” And he said, “I can sell it to a competitor. And if I sold it to a competitor, they’d fire my people and keep their people when they put it together.

“And if I sell it to a private equity firm or something, they’ll be figuring out their exit strategy as they sign the papers.” And he said, “It isn’t that you’re such a great guy, it’s just that you’re the only one left.” (Laughter)

And we bought it, and we lived happily ever after. And that was a man that knew the life was about.