In a recent article in the Globe & Mail, Thane Stenner dissects some helpful and balanced advice on issues related to estate planning by American businessman, investor and philanthropist, Warren Buffett.
His advice is not of the sort one might expect from a successful business magnate. It relates less to investment choices and tax avoidance than it does to family, charity and communication.
One notable piece of advice is in regard to how much a testator should leave to children. While (tragically) few of us will be faced with the problem of having too much to give away, the lesson can apply to individuals with more modest estates as well. Buffett, responding to a concern about spoiling children with an overabundant inheritance, began his reply by saying, "I think that more of our kids are ruined by the behaviour of their parents than by the amount of the inheritance." The message Buffett is communicating is that it is not how much money is left to children that will determine whether they are spoiled by it or not, but the values, knowledge and experiences that are transmitted from testator to beneficiary that will dictate how wisely they will manage their inheritance, regardless of its size. This applies equally to estate plans great and small.
Another comment that Mr. Stenner has wisely plucked from Mr. Buffett's speech is that an estate plan should be updated every few years. Many testators prepare a will and assume that their estate planning is done. Meanwhile, years and decades pass without giving the will a second thought. When it comes time for the will to take effect, it may no longer be relevant, and may not accurately or appropriately reflect what the testator may have wanted. Assets described in a will can come and go, leading to ademption issues. Named beneficiaries and estate trustees can come into and fade out of a testator's life. Your will, and indeed your whole estate plan, should get a "checkup" at least every five years. It should also be carefully reviewed on a significant change in life circumstances, such as a marriage, a divorce, the birth of a child or grandchild, the death of a family member, or a significant change in the form or value of the assets it governs. Ensuring that an estate plan stays current is an important way to protect your testamentary autonomy and to prevent litigation and heartache for beneficiaries down the road.
Mr. Buffett also suggested that the would-be beneficiaries should, in many circumstances, be participants in the estate planning process. Ideally, there should be no surprises when a testator passes away. This will help to prevent shock, disappointment and litigation. If a beneficiary is inheriting less than his or her siblings, he or she should know why ahead of time, so that decision will not be challenged later on. Of course, this may lead to anger or resentment, but the likelihood of dispelling this anger is much greater when the testator is alive and present to explain the rationale. An unequal distribution may be seen as unfair, but it may simply be the case that the testator intended to or did advance a gift to the slighted beneficiary during his or her lifetime, or had greater confidence in the ability of that beneficiary to provide for himself or herself.
Finally, Warren Buffett reminds us of our responsibilities to society. As a philanthropist, he has made considerable contributions to causes such as the Bill and Melinda Gates Foundation. While most of us don’t have billions to give away, it is worth remembering that even a small contribution can make a big difference.
Have a wonderful day,