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Warren Buffett says Berkshire is '100% prepared' for his death, details what will happen to his stock

Julia La Roche
Correspondent

Investing icon Warren Buffett says Berkshire Hathaway (BRK-ABRK-B) is "100% prepared" for his death, and detailed what will happen to his shares in that event.

In his widely-read annual letter, Buffett told the story of how his friend received "an irritating letter" from a local newspaper seeking biographical data for an obituary. When his friend didn't respond to the request, he received a second letter labeled "URGENT."

"Charlie [Munger] and I long ago entered the urgent zone," the 89-year-old wrote. "That's not exactly great news for us. But Berkshire shareholders need not worry: Your company is 100% prepared for our departure.”

He went on to highlight many reasons for why they're optimistic about Berkshire's future without them at the helm, everything from the entity's structure, its managers, and its culture "that is rare among giant corporations."

Buffett, whose net worth is estimated by Forbes to be $90.2 billion, has 99% of his net worth in Berkshire shares. He gave shareholders an overview of what will happen to his stock when he dies.

"Today, my will specifically directs its executors — as well as the trustees who will succeed them in administering my estate after the will is closed — not to sell any Berkshire shares," he wrote.

In 2010, Buffett co-founded and signed The Giving Pledge, a movement he started with Bill and Melinda Gates to encourage the ultra-wealthy to give more than half of their wealth away to charity. Over several years, Buffett's stock will gradually be converted and deployed for charitable efforts.

"The will goes on to instruct the executors – and, in time, the trustees – to each year convert a portion of my A shares into B shares and then distribute the Bs to various foundations,” he wrote. “Those foundations will be required to deploy their grants promptly. In all, I estimate that it will take 12 to 15 years for the entirety of the Berkshire shares I hold at my death to move into the market.”

Berkshire Hathaway Chairman and CEO Warren Buffett, left, and Vice Chairman Charlie Munger, briefly chat with reporters Friday, May 3, 2019, one day before Berkshire Hathaway's annual shareholders meeting. An estimated 40,000 people are expected in town for the event, where Buffett and Munger preside over the meeting and spend hours answering questions. (AP Photo/Nati Harnik)

If there isn't an explicit directive in the will, Buffett said his shares "should be held until their scheduled distribution dates" and the "safe" course of action will be to sell the shares "under their temporary control and reinvest the proceeds in U.S. Treasury bonds with maturities matching the scheduled dates for distributions."

"That strategy would leave the fiduciaries immune from both public criticism and the possibility of personal liability for failure to act in accordance with the 'prudent man' standard," he added.

Buffett said he's "comfortable" that Berkshire's stock "will provide a safe and rewarding investment" during this time, noting that there's an "unlikely, but not negligible" chance he's proven wrong.

"I believe, however, that there is a high probability that my directive will deliver substantially greater resources to society than would result from a conventional course of action,” he said. “Key to my 'Berkshire-only' instructions is my faith in the future judgment and fidelity of Berkshire directors. They will regularly be tested by Wall Streeters bearing fees. At many companies, these super-salesmen might win. I do not, however, expect that to happen at Berkshire.”

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Julia La Roche is a Correspondent at Yahoo FinanceFollow her on Twitter.

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