Take a Cue From Warren Buffett: Be Flexible With Philanthropic Strategies

Late last year, Warren Buffett announced that his fortune will be directed to a charitable trust managed by his three children when he dies.

The announcement, made via Berkshire Hathaway where Buffett, 93, is chairman and CEO, was the first indication of how the famous investor planned to distribute his assets upon his death.

The fact Buffett waited to make these plans until he was 93—and his children were between the ages of 65 and 70—is not necessarily unusual for very wealthy people whose estate plans, and philanthropic giving strategies, constantly evolve, according to wealth management experts.

“We tell our clients all the time, you want to try to have as much flexibility in your future planning as possible because you just don’t know how situations are going to change,” says Paul Karger, co-founder and managing director of wealth advisory firm TwinFocus in Boston.

Buffett, for instance, made a lifetime commitment in 2006 to distribute annual grants to five foundations: the Bill and Melinda Gates Foundation, the Susan Thompson Buffett Foundation (named for his late wife), and foundations run by each of children. Since then, he has distributed Berkshire B shares valued at about US$55 billion when they were received to these organizations, Buffett said in a June 28 statement issued by Berkshire Hathaway. The Bill and Melinda Gates Foundation—where Buffett served as a board member until Gates and French Gates announced their divorce in 2021—had received US$39.3 billion through 2023, the organization’s website said.

Annual gifts to those foundations will continue until Buffett dies and his remaining assets are transferred to the charitable trust. In the June 28 statement, Buffett said his current holdings of Berkshire A shares (which he converts to B shares to make the charitable contributions) “are worth about US$127 billion, roughly 99.5% of my net worth.”

When Buffett announced his intentions for the distribution of this fortune, he said his children “were not fully prepared” in 2006 to serve as executors of his will and trustees of the charitable trust “but they are now.”

Recognising that things change and that “it’s impossible to prepare for every scenario,” is a lesson that Karger often preaches.

Currently, Karger’s firm is working with a billionaire family that wants to give all their money away to charity. “They don’t want their kids to have any,” Karger says.

So TwinFocus is trying to introduce planning techniques to “baby-step” this family’s intentions, “because some of those decisions are not reversible,” he says. “There are seasons to our lives, and we think about life differently in different seasons. You don’t want to live with a mistake that you can’t fix, especially with this level of wealth.”

Justin Flach, managing director for wealth strategy in the San Diego office of Ascent Private Capital Management, the ultra-high-net-worth division of U.S. Bank Wealth Management, says Buffett’s strategy of providing gifts to his children’s foundations since 2006 and now deciding to create a charitable trust funded by his assets that they will manage, is an established approach.

“That’s something you see very commonly with families is that as the family starts to dip its toe into philanthropy, they need to learn together and train together and make sure they’re aligned about how they want to proceed,” Flach says. “Something like this isn’t uncommon because it just shows a family adapting over time.”

Flach also encourages ultra-rich families to begin giving away wealth during their lifetime, as Buffett has done, and he sees far more of them taking this approach today. By doing so, philanthropists can experience “their full empathy” during their lifetime. It also means they can find out if their charitable strategy works or not.

“It allows them to assess [whether] the people they’re working with are the right partners,” Flach says. It also allows them to see whether those they hope to hand their charitable assets off to are “trained and ready to take over when they’re gone.”

A charitable trust—the structure that Buffett is using to absorb his wealth—is an “irrevocable” vehicle for tax purposes, meaning, the assets in the trust can’t be taken out for anything other than distributing funds to nonprofits.

In Buffett’s case, his three children “must act unanimously” when deciding where the trust’s assets will be granted, he said. They also must designate successors. Buffett indicated he isn’t placing more rules on the trust because “wise trustees above ground are preferable to any strictures written by someone long gone.”

He did say, however, that the trust will be spent down “after a decade or so,” and will have a “lean staff.”

Setting up a charitable trust, such as the one Buffett’s children will direct, serves two purposes. It “helps them fund the family’s philanthropy long after the family members have passed,” Flach says, and “there’s an estate tax deduction for gifts to charity at death. That can be a very valuable way to reduce your estate taxes.”

The trust structure is similar to a private foundation, although only a trust can be created through a will, he says. Both vehicles are treated the same for tax purposes and have the same disclosure requirements, meaning they have to tell the IRS where the money is granted and they have to distribute at least 5% of assets each year to qualified nonprofits.

Though Buffett has chosen to have his trust spent down, a family could instead create a perpetual trust that would live on through generations, Flach says.

For very wealthy families, it’s important to regularly review estate plans, including plans for charitable giving. At least every five years, documents should be reviewed to ensure past choices still make sense and can be amended as needed, Karger says.

The super wealthy, those with assets of US$100 million or more, should consider using their current lifetime gift exclusion—currently US$13.1 million per person—to create an irrevocable trust. That would allow an individual “to move assets outside of their estate [and] let them grow for the next generation estate tax exempt,” he says.

Flach agrees wealthy families should regularly assess their estate and philanthropic planning, which, depending on a family’s situation or desire, could be annually or every few years.

“Going back through and making sure that you’d make the same decisions today

that you made when you created the plan, based on the facts of what they are today,

is a really good exercise,” Flach says. “It allows you to make sure that when ultimately you do pass on, or when you’re ultimately giving to a philanthropic cause, that your wishes are truly being carried out, as opposed to what your wishes may have been 20, 30, 40 years ago.”

KYIV, Ukraine—Beyond the bombs and gunfire of Russia’s war in Ukraine , a parallel economic war is raging.

Its front line is on occupied Ukrainian farmlands, from which Russia and its partners have sold almost $1 billion in stolen grain on a burgeoning black market.

Moscow’s forces in Ukraine since 2022 have occupied some of Europe’s most fertile farmland. The occupiers have either seized harvests or bought them cheaply, often forcibly.

The business involves a wide network of clients who benefit from Moscow’s wartime patronage system, including a Russian shipyard equipping the invasion, a company affiliated with Iran’s Revolutionary Guard and a Crimean businessman who trades with Syria and Israel. Another company sells through the United Arab Emirates.

Trading the looted Ukrainian agricultural products keeps Russia’s allies funded and loyal to Moscow even as it faces mounting economic pressure , offering a sort of off-balance-sheet vehicle financing Kremlin objectives.

The Kremlin didn’t return requests for comment on its exports of Ukrainian crops.

“It’s like the war is feeding itself,” said Pascal Turlan, legal director at rights organization Project Expedite Justice, which is helping Ukrainian prosecutors investigate grain theft. “The illicit trade brings revenue to a Kremlin-sponsored patronage system, which in turn helps the conflict and the occupation to continue.”

The exact commercial value of Russia’s pilferage is difficult to determine amid the war’s chaos and Moscow’s subterfuge, but it is large. Since 2022, the operation has directly shipped at least 4 million tons of grain and other produce from occupied Ukraine to international markets, generating revenue of $800 million, said Markiyan Dmytrasevych, Ukraine’s deputy agriculture minister.

Much more has been exported by land or small ships, according to Ukrainian nonprofit organization Texty, which estimates the total value of grain taken by Russia in occupied territories could be as high as $6.4 billion.

The patronage take many forms. Three bulk vessels that export large volumes of illicit grain are owned through a chain of corporate entities by Russia’s state-run United Shipbuilding Corp., which also produced warships used to shell Ukrainian cities, according to the U.S. government.

A Russian company that exclusively sold grain from the occupied region of Zaporizhzhia donated 10 million rubles, or $111,000, to a battalion fighting in the province, according to a document obtained by KibOrg News, a Ukrainian project that documents Russian economic-looting activities in the occupied territories.

Moscow is also attacking Ukraine’s own grain exports. Late Wednesday, a Russian missile struck at a ship that was carrying Ukrainian wheat just after it had left a Black Sea port for Egypt, Ukraine’s president Volodymyr Zelensky said on his Telegram channel.

From farm to sea
Russia’s illicit agricultural trade begins on Ukrainian farms. Moscow’s forces either compel farmers to sell their crops at below-market prices or steal them, sometimes at gunpoint.

Bohdan Katerenyak, the manager of a silo in Kherson, a southern Ukrainian province conquered by Russia at the beginning of the war, said he was at work in August 2022 when men with machine guns, clad in balaclavas, entered his office.

“We have an order to take over,” one told him in a Chechen accent, handing him an identification card from the FSB, Russia’s domestic security service, Katerenyak said. A few days later, another man, also claiming to be an FSB agent, arrived and impounded the facility’s grain.

“They are bandits,” Katerenyak said of the men. Fearful, he fled to Ukrainian-controlled territory and later learned the silos had been emptied.

From farms like Katerenyak’s, produce is shipped by truck and rail to ports along the Black Sea, some on occupied Ukrainian territory.

Russian authorities say that in the first half of this year they sent 15 ships carrying 81,000 tons of wheat to Turkey from Mariupol, another city conquered during the war.

Turkey bans ships from occupied Ukrainian terminals and cooperates with Kyiv to block illicit trade, the country’s foreign-affairs officials said.

Separately, Ukrainian prosecutor Ihor Ponochovniy in June started tracking a Turkish-owned ship, the Usko MFU, which he suspected had carried stolen grain last year from the Crimean port of Sevastopol . Russia seized Crimea from Ukraine in 2014 and in 2022 linked it with occupied Kherson.

Ukraine’s border force in June told Ponochovniy the Usko MFU had entered Ukrainian waters. He issued a search warrant and police boarded it. Onboard they found records showing it had left Sevastopol last November for Turkey carrying 2,100 tons of crushed sunflower seeds and brown wheat potentially worth half a million dollars.

Investigators said they found onboard a message from the ship’s managers to the captain instructing him to conceal the cargo’s Crimean origin. Ukraine’s border force in July seized the Usko MFU.

The ship’s owner, USKO Shipping Management, didn’t respond to a request for comment. A lawyer representing the vessel’s captain declined to comment.

Mikhail Ganaga, a former professional wrestler and the son of a district governor in Crimea, is among a select group of collaborators who have profited from the grain theft.

Ganaga controls Agro-Fregat LLC, which delivers grain harvested in occupied territories and has shipped grain to Israel and two of its foes, Syria and Iran, according to trade and shipping records and Ganaga himself. Ganaga and Agro-Fregat didn’t return requests for comment.

Pressure to halt shipments

Ukraine is applying diplomatic pressure on importing countries, with some success. In the past two years, Egypt, Israel and Lebanon either canceled loadings or stopped buying grain cargoes after Ukrainian diplomats told them they had departed from Russian-occupied parts of Ukraine , according to Ukrainian officials.

Foreign Ministry spokesman Heorhiy Tykhiy said that Lebanon shifted to Ukrainian grain. Egypt has refused some grain shipments that originated in Russian-occupied territories of Ukraine, according to Ukraine’s military intelligence agency.

Russian allies Iran and Syria have said they won’t abide by sanctions. Iran has supplied the Kremlin deadly weaponry that enhanced Russia’s ability to hit military and civilian targets. This month, Tehran started to supply ballistic missiles to the Kremlin. Iranian politicians said they were in exchange for Russian grain.

Tehran buys barley in Crimea for $140 a ton, a 34% discount from market prices, said Kateryna Yaresko, an analyst at SeaKrime, a nonprofit project in Kyiv that tracks illegal shipments from Crimea and provides information to the Ukrainian authorities.

Traders in Russian-occupied territories are building ties with Tehran’s hard-line circles. Igor Rudetsky, a manager at a grain terminal in occupied Crimea, last year posted on his social-media accounts pictures of himself meeting representatives of Islamic Republic of Iran Shipping Lines, which is sanctioned by the U.S. for shipping weapons on behalf of Iran’s military and nuclear technologies.

Rudetsky, according to his posts, also visited Pars Holding, an agricultural company that is part of a foundation controlled by Iranian Supreme Leader Ali Khamenei . Rudetsky said by text message that he spoke to the companies as part of an international marketing campaign that also included China, India and Africa, though he says he doesn’t sell produce himself.

Rudetsky said grain exports from Russia aren’t restricted by international sanctions and that he bought the port “for real money” in a deal that was “legally impeccable.”

Russia deems Crimea its territory but other countries don’t and consider any exports from it illegal.

Yemen is a new market for Crimean exports. In June, a Russian state-controlled vessel, the Zafar, delivered grains to al-Salif, a port held by the Iranian-backed Houthi faction in Yemen, according to shipping and corporate records.

As Kyiv cracks down, exporters are adopting increasingly complex evasion tactics such as transferring grain to Russia and mixing it with legitimate products before reselling it on international markets. Ukrainian authorities are struggling to keep up.

“We need more people,” said Ponochovniy, the prosecutor.

Ukrainian prosecutors in Kharkiv are probing a trader that it suspects stole grain and resold cargoes to an Emirati company. Helios Plus drew prosecutors’ attention after it removed all 700 tons of grain left at a bread factory flour mill in the nearby town of Kupyansk when Russia seized it in August 2022.

Helios Plus didn’t respond to a request for comment.

The company in 2015 started selling grain out of areas of eastern Ukraine that had come under control of Russian-backed separatists, according to Russian records viewed by The Wall Street Journal. The records were obtained in an investigation by Project Expedite Justice.

The documents indicate Helios Plus took a large volume of grain from other occupied territories in the past two years. It then sold the grain to buyers in Turkey, the U.A.E. and as far as Costa Rica, according to customs declarations.

Take a Cue From Warren Buffett: Be Flexible With Philanthropic Strategies

Moscow’s war ‘is feeding itself’ as friends and backers cash in on crops from occupied territories

Pressure to halt shipments