INSUBCONTINENT EXCLUSIVE:
success at investing is well known
with a mere 19,784% gain for the S-P 500
On an annualized basis, Buffett has returned twice as much as the stock index.
All that success has made him a very rich man, and this year,
He addressed what happens to his vast wealth when his time is up.
On Page 11 of the letter, Buffett discusses how he and his lieutenant,
Charlie Munger, 96, have positioned executives at Berkshire Hathaway to carry on after they die
like a straightforward plan, then you are not well versed in the myriad lawsuits that such provisions have prompted in the past
Klein, president of family wealth for the Eastern United States at Wilmington Trust
place to make future corporate and individual trustees comfortable
But not everyone putting directions like his into a trust has the wherewithal and advice to grasp what that guidance means.
Generally,
trustees are expected to diversify the assets of a trust
When that has not happened and the value of the trust has fallen substantially, beneficiaries and state attorneys general (on behalf of
charities) have sued the trustees.
One of the better known cases involving restrictive provisions is the Dumont case from 2004, which
case, the trustee was charged with failing to review the investments and not informing the beneficiaries that the value was falling
The lawyers showed that the trustee had not performed the regular due diligence of a fiduciary.
The trustee, in turn, argued that Charles
Dumont, who created the trust in the 1950s and funded it with Kodak stock, was explicit in his desire that the trust not sell the stock
That judgment was overturned on appeal, but the Dumont case is still discussed among the risks that trustees face in not properly performing
Gordon, founding partner of the Gordon, Fournaris - Mammarella law firm in Delaware.
The situation is made worse, he said, when trustees
After all, how much work could it be to monitor a single stock?
Buffett wrote in the letter that keeping such a concentrated position of
stock was not in accordance with prudent trust management and could open up trustees to litigation from beneficiaries who received less
charity.
This acknowledgment might seem enough to absolve the trustees, but such directives have not always protected trustees from
litigation over the management of the assets
Once a trust is funded, those trustees are managing and distributing that money for an entity that is separate from Buffett or any other
person who created the trust
They are responsible to the beneficiaries, be they charities or individuals, who are expecting to get distributions that do not
And attorneys general are vigilant overseers of charitable funds
restrictive, advisers recommend setting up a directed trust, which splits up the roles of trustees and gives some the right to direct
These trusts have existed for a century in Delaware, and other states have adopted them more recently, including Nebraska, where Buffett
Dadakis, a partner at Holland - Knight
documents, but they generally involve going to court for guidance
One strategy is decanting, in which the assets of an existing trust are poured into a new one
Another is looking for provisions that allow the assets to be distributed to other beneficiaries, who can then put them in their own
trusts.
Not surprisingly, Buffett is bullish on the prospects of Berkshire Hathaway even after he and Munger are gone
But this is a blind spot that business creators often have: Past performance does not dictate future returns.
Berkshire Hathaway is not
making a product, the way Kodak made film before the world went digital
It is making decisions about how to allocate capital into various companies, a process that requires its own expertise.
Buffett has done
spectacularly well over the past six decades making investment decisions, but it is not unreasonable to wonder if his successors can do the
some guidance is fine, but commanding trustees to do a series of things when the world could change even a few years from now is ruling from
Rosenbloom, a partner at Stroock - Stroock - Lavan