Warren Buffett Held the cards close to his chest for a long time when it came to his investment plans. Now, nonprofits including the Bill and Melinda Gates Foundation are in a hurry to tune in to possible changes in its future donation patterns. The results could dramatically change the world of philanthropy.
In 2006, the billionaire from Omaha made a public pledge worth tens of billions of dollars: he announced that he would allocate 85 percent of his stake in Berkshire Hathaway to charity, with the majority transferred to the Gates Foundation – an international donation fund run by his longtime friends. In a public letter, he wrote that he “unchangeably undertakes to annually donate Berkshire Hathaway’s B ‘shares to the Gates Fund for the rest of his life.”
What is less clear is what will happen to the undistributed shares, after Buffett, who will celebrate 92 this August, dies.
For years, the Gates Foundation has been preparing for this event. Workers rushed to find possible targets for an unexpected flow of funding, an effort dubbed the “Lincoln Project,” former workers say. In 2010, Buffett announced that he planned to eventually donate 99% of his fortune.
Now, similar preparations are being made in another organization – a not-so-well-known Buffett family foundation that supports the right to abortion. Managers at the Susan Thompson Buffett Fund employ employees and draw up plans to invest huge sums of money, which the small organization is supposed to receive – according to documents viewed by the Wall Street Journal and people who work at the fund today and in the past.
While Buffett refrained from disclosing to the public how his estate would be divided, senior officials at both funds discussed in-house meetings that the amount left in the Buffett family’s family fund could be between $ 70 billion and $ 100 billion, according to documents and some of the people who spoke to the paper. A grant of this size would make the Buffett Foundation one of the largest philanthropic foundations in the world.
From $ 90 billion to $ 200 billion
Buffett’s stake in Berkshire, which is in fact most of his capital, is currently estimated at about $ 90 billion. Of this, about $ 56 billion is already listed as a long-term donation to the Gates Foundation; 17.4 billion is allocated to four non-profit organizations including the Buffett Foundation; And the remaining $ 18.7 billion still has no target, according to Buffett’s public statements and an analysis by the Wall Street Journal.
Assuming Berkshire shares perform similarly to those of the past decade and Buffett continues to contribute each year as he has done so far, his holdings will be worth more than $ 200 billion in a decade. According to sources familiar with the activities at these two funds, the plans for this part of Buffett’s estate, which have been underway for several years, including this year, are unrelated to the billionaire’s health. In response to questions from the Wall Street Journal, Buffett replied that “there is a great deal of inaccuracy in your report.” Managers at the Gates Foundation and the Buffett Foundation did not respond to requests for comment.
Internal speculation about Buffett’s intentions added about $ 50 billion to the Gates Fund’s uncertainty. When Bill Gates and Melinda French Gates began divorce proceedings in 2021, they said they would continue to work together as chairmen of the foundation in their name. Less than two months later, Buffett resigned as a trustee of the fund as part of the fund’s attempt to bring in more independent oversight. Melinda Gates later said she would transfer a larger share of her capital to other charitable funds. Under the divorce agreement, she agreed to resign from the fund in 2023 if she and her husband jointly decided they could no longer work together.
Earlier this year, the Gates Foundation amended a press release, which had already sent and removed a section stating that the former couple and Buffett would devote most of their remaining resources to the foundation. A spokeswoman for the Gates Foundation told the Wall Street Journal at the time that the press release had been amended “to clarify a mistake related to future promises,” and that the foundation could not speak on Buffett’s behalf regarding his future contributions.
Gates: “Buffett moved me to tears”
Last month, Gates said the divorce did not interfere with philanthropic activities and praised Buffett’s contributions and advice. “Half of what goes into the fund is thanks to the generosity of Warren Buffett,” Geist said at the Wall Street Journal’s CEOs Conference.
On June 14, after Buffett made his $ 3 billion annual contribution to the Gates Foundation, Gates wrote on Twitter, “When he decided in 2006 to make those donations, he moved me to tears. It still moves me to tears.”
Buffett has been one of the largest contributors to the Gates Foundation since 2006. In that year, Buffett’s contribution was estimated at about $ 30 billion. In the last 17 years, Buffett has given 58% of the shares he promised to contribute, but the rise in Berkshire’s share price has meant that his contributions to the fund, in terms of stock splits and price when making each annual contribution, have already reached $ 36 billion, according to Reports to the Securities Authority.
The wording of Buffett’s 2006 letter of promise to the Gates couple leaves some fog about his plans for his estate after his death, according to estate planning experts.
Buffett, then 75, wrote that he would make annual donations of 5% of the remaining shares during his lifetime – a formula that effectively states that it is mathematically impossible to complete the donation before he dies. He also wrote at the time that “I will soon write a new will and there will be a detailed continuation of this commitment – by distributing the rest of the shares allotted to the subject or otherwise – after my death.”
According to Professor Victoria Hanman of the University of Creighton in Nebraska, who specializes in estate planning and tax planning, there is not enough information available to the public from which to deduce how Buffett’s liabilities will be managed after his death. According to her, if Buffett did not receive any consideration against his 2006 commitment, such as a building to be named after him, it is not certain that the completion of the donation can be enforced.
“How will we distribute the donations after his death?”
Despite the apparent uncertainty, many Gates employees have been assuming for many years that the fund will eventually receive the full amount of shares that Buffett promised as well as most of the shares he did not promise, people who worked with the fund said.
In anticipation of the promised outflow of funds, the fund’s CEO, dozens of employees and consultants from the McKinsey consulting firm participated in analyzing and writing future plans as part of what became known as the Lincoln Project. Complex because some of the current recipients of the Gates Foundation donations have already received the maximum funds and were not allowed to receive additional donations, said one former employee who took part in the thinking teams.
One of the ideas that came up was to set up a savings bank for the children of the world, where every child could get thousands of dollars, some people said. “It’s sitting on the shelf, like a strategic battle plan in case it needs to be launched,” the former employee said.
The Susan Buffett Foundation – a low profile organization
Compared to the Gates Foundation, which has about 1,800 employees and operations around the world, the Buffett Foundation is a low-profile organization. Its offices are in Buffett’s hometown, Omaha, and she is named after his first wife who died. Most of the members of the fund’s board are family and friends and it directly employs only a few dozen employees.
The Buffett Foundation keeps most of its activities private. The foundation was established in 1964 and began providing scholarships to college students in Nebraska, but the foundation spent most of its money on providing access to abortions and fertility-related health services, according to its annual reports to the tax authorities. She sometimes makes anonymous donations, in line with Susan Buffett’s desire to focus on organizations that ‘do the work’ and not on those who just ‘write checks’.
Buffett, who died in 2004 and left more than $ 2 billion worth of shares in the fund, was a civil rights activist, abortion activist and supported contraception. The association in its name contributes to organizations such as Planned Parenthood, the Center for Fertility Rights, and the National Network of Abortion Funds, according to reports to the tax authorities.
The couple married in 1952 and had three children, but they lived separately for several decades. Buffett has previously said that he understands little about philanthropy and that he expects his wife to live more years than him and gear up for their philanthropic initiatives after his death. After she passed away at the age of 72, he began to re-examine his plans.
Buffett was the second richest man in the world when he announced in 2006 that he would donate most of his fortune to the Gates Foundation, then run by the richest couple in the world. The Oracle of Omaha said at the time that it had decided to partner with the Gates because it trusted them to do a better job than the Susan Thompson Buffett Foundation in distributing money for social assistance and funding vaccines and drugs for infectious diseases than it could do.
“I came to the realization that there is a great fund that is already on a large scale, that you will not have to go through the tedious stage of growing to a huge size, that the same Buffett fund will have to go through – and that you can use my money productively immediately,” he told Fortune magazine.
Buffett is unhappy with the number of Gates Foundation employees
When they joined forces, Gates said his friendship with Buffett, which began in the 1990s, inspired him and his wife Melinda to set up their own foundation in 2000, initially focusing on world health and education in the United States. Buffett has repeatedly expressed his contempt for Inherited capital.
Buffett with Bill and Melinda Gates, 2006 / Photo: Reuters, Miller David ABACA
In a similar letter from 2006, Buffett allotted Berkshire shares that were then worth about $ 3 billion to the Susan Thompson Buffett Fund, which held $ 270 million in assets. Another Berkshire stock division was to be evenly divided between three funds headed by the couple’s children. Buffett later announced that he would donate 99% of his capital to charity as part of the Giving Pledge, an initiative he founded in 2010 with Gates and French Gates in which billionaires pledge to donate a significant portion of their capital after their deaths. In 2012, Buffett pledged to give more Berkshire shares to funds managed by his children.
Buffett attended the Gates Foundation board meetings but was generally not involved in the details of philanthropic decisions. He left these to Gates and his ex-wife, French Gates, to do on their own, former fund employees said.
The Gates Foundation has expanded, adding hundreds of full-time employees to various projects around the world. Over time, the expansion did not suit Buffett, who continues to live in the same house in Omaha he purchased in 1958 for $ 31,500 and runs Berkshire with a small team of assistants.
Buffett did not hide his dissatisfaction with what he thought was the “excessive size of the fund,” said people familiar with the matter. He wanted the number of employees to be limited, which led to layoffs in 2015, some people said. He was also not happy with the amount of advisers the Gates employed on issues the foundation dealt with, the people said.
The Gates divorce – Buffett resigns
In 2021, not long after the Gates announced their divorce after 27 years of marriage, Buffett resigned as a trustee on the Gates Foundation. In a written statement, he said he had been an inactive member of the fund for years, resigning as he had resigned from any board of directors in which he was a member other than Berkshire.
Buffett and Gates still talk routinely and meet each other, said people familiar with the connection between them and registering their private flights. Gates attended the annual Berkshire Investors Meeting in Omaha this spring.
Since 2019, the Buffett Fund has been preparing for a significant cash flow when Buffett’s estate is settled, people familiar with the subject said. In recent months, workers have been discussing the allocation of funds expected for both U.S. purposes and international efforts, with a combination of health and fertility and general health, which may include expanding into areas of vaccines and treating infectious diseases, according to documents.
As with the Gates Foundation, Buffett himself does not really interfere in the affairs of the Susan Buffett Foundation. The foundation’s president is Buffett’s former groom, Alan Greenberg, and some of Buffett’s children and grandchildren sit on its board. The fund has recently expanded to include workers in Washington and Rwanda in Africa.
For several years, employees debated whether the grandchildren would eventually run the fund, but in 2019 employees learned that Buffett wanted the money out within 10 years and that the fund would cease to exist after that, the people said.
“For several decades I have amassed an almost unimaginable amount of money, simply because I did what I love to do,” Buffett said in a written statement last year. “Civil society has something to do with my money; I have none,” he said.