Warren Buffett, 93, with a net worth of $134.3 billion, has revised his will. He now intends to leave his wealth to new charitable trusts managed by his three children. The move marks a change from his previous commitment to the Bill & Melinda Gates Foundation.
"The Gates Foundation has no source of funds after my death," Buffett said.
While that does not rule out future donations to the Gates Foundation, Buffett said they would have to unanimously decide how to spend his billions after his death.
Buffett: 100% trust in children's handling of estate
Buffett expressed complete trust in his children's values and their ability to manage his estate. He believes they will respect his wishes and handle the wealth responsibly.
Buffett's tax evasion plan?
Buffett's decision also has significant tax implications. In the United States, estate taxes on more than $2.5 million can be as high as 50%. Donating to charity is a legal way to mitigate those taxes. Charitable foundations must spend 5% of their assets each year, but there are no specific rules on how to use the money. This allows a range of expenses to be paid by the operation of the foundation, thereby indirectly benefiting his children.
This strategy allows Buffett to avoid high taxes, maintain his philanthropic image, and ensure that his wealth benefits his children. His children can manage the foundation's funds and may use them for personal interests, such as travel and purchasing art, while complying with tax laws.
Buffett has previously pledged to donate 99% of his wealth to various charitable organizations, including the Gates Foundation. This new move consolidates his family's control over his wealth and ensures that his legacy and wealth remain intact.
The United States' donation tax avoidance system
Some people may ask, if Buffett really wants to leave money to his children, why not give it directly to them, but to do it through charity? Combined with the United States' estate tax system, the answer to this question becomes clear. The United States began to levy estate taxes as early as the 18th century, and the tax rate was as high as 77% in the mid-1990s. Although today's tax rates have dropped, the estate tax rate is still as high as 50% for the portion of the estate amount exceeding $2.5 million. Therefore, charitable donations have become a mainstream legal tax avoidance method.
The benefits of operating a charitable foundation
After Buffett donated his estate to charities, since these huge funds did not stipulate how much money must be paid for charity each year, his children could legally reimburse the foundation for their living expenses, such as personnel expenses, commuting expenses, venue rental, and art acquisitions, even if they only took out a small part of the funds each year.
The US tax avoidance system for donations
According to US tax laws, charitable foundations must spend 5% of their total assets each year, but there are no strict restrictions on where they are used, and the income obtained is not subject to tax. Therefore, if the foundation's funds are used for investment, it may even earn more income.
In this way, Buffett can not only legally avoid taxes, but also gain a good reputation, while passing on wealth to his children and preventing individual children from getting too much money at one time and squandering the family fortune, which can be said to kill two birds with one stone. In addition, these foundations have other uses, such as donating to prestigious schools to obtain admission qualifications for future children, or influencing the political situation through the foundation's think tanks. For example, the Rockefeller Foundation has produced three US secretaries of state.
After knowing this, when you hear the rich say "Money is not important to me, I want to give back to society", doesn't it seem particularly ironic?
Warren Buffett's legendary life: From investment salesman to charity giant
Warren Buffett, this name is synonymous with investment acumen. Buffett was born in an old hospital in downtown Omaha, Nebraska. He was born into a wealthy family. His father was a two-term US congressman and a successful businessman.
From 1951 to 1954, he worked as an investment salesman at Buffett-Falk Company, starting his career. From 1954 to 1956, he moved to Graham-Newman Company as a securities analyst, honing his skills under the guidance of Benjamin Graham, who strictly adhered to the principles of value investment.
Buffett's value investment foundation
In 1956, Buffett founded Buffett Associates, Ltd., raising $105,000 from various investors, including doctors. This was the beginning of a successful investment partnership that grew more than 30% annually from 1956 to 1969, far outperforming the market average.
Acquisition of Berkshire Hathaway
The strength of Buffett’s strategy was apparent in 1962 when he began buying shares of Berkshire Hathaway. Berkshire was originally a textile company that was undervalued in the market. Although Buffett admitted that this was a major investment mistake, he used Berkshire’s cash reserves to acquire other businesses, building Berkshire into one of the world’s largest holding companies.
Influenced by business partner Charlie Munger, Buffett shifted from strictly adhering to Graham’s principles to investing in companies with durable competitive advantages. This approach, known as finding companies with “economic moats,” became a hallmark of Berkshire Hathaway’s investment strategy.
Buffett’s investments in companies such as Coca-Cola exemplify this strategy. Coca-Cola’s strong brand loyalty allows it to charge higher prices than regular beverages, a clear competitive advantage. Buffett’s focus on acquiring entire companies rather than just shares also sets Berkshire apart.
Buffett's net worth has grown significantly over the years. By 1990, Berkshire's stock price had soared, making Buffett a billionaire. He continued to climb the ranks of the world's richest people, reaching the top in 2008 and remaining at the top in the following years.
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