Jimmy Buffett died in September 2023. While his estate exceeds $275 million, we all can learn from the dispute between Buffett’s widow, Jane Slagsvol, and his business manager, Richard Mozenter.
Slagsvol and Mozenter are co-trustees. Slagsvol was married to Buffett for 46 years. Mozenter worked for Buffett for more than 30 years and viewed himself as Buffett’s friend for more than 15 years. On paper, they seem to be a great combination to be co-trustees.
Most of Buffett’s assets were funded or transferred into a marital trust that designated Slagsvol as the primary beneficiary. Other trusts were established for Buffett and Slagsvol’s children and are not part of this dispute.
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A marital trust is designed to qualify for the estate tax marital deduction. This means Slagsvol, as the surviving spouse, is to receive all of the income from the trust for her life.
As the income beneficiary, she has the right to require that the assets in the trust are invested appropriately to produce income.
Slagsvol seeks the removal of Mozenter as a trustee for failing to generate sufficient income with trust investments and for failing to inform her of trust investments, income and expenses.
She asserts that Mozenter has been “openly hostile” and working against her interests. Mozenter also seeks the removal of Slagsvol as a co-trustee.
Slagsvol notes that Mozenter was paid $1.7 million in 2024 in trustee fees while the trust earned a less than 1% return on income. She indicated that the 1% return does not cover her expenses.
Lessons we can learn
While your estate may be significantly less than $275 million, there are lessons to be learned from the Buffett estate issues.
1. Use additional caution when selecting co-trustees.
Here, Buffett chose probably the two people he trusted the most. Slagsvol and Mozenter have known each other for decades and, on paper, this seems like a good match.
Due to the size and complexity of the estate, using a professional co-trustee would seem to be a good choice. Including Slagsvol as a co-trustee ensures that she retains a measure of control over assets in a trust where she is the primary beneficiary during her life.
In addition to finding trusted people to act as trustees, we also want to be confident that the trustees will be able to work together. The use of a professional co-trustee can be particularly helpful with the administration of a special needs trust.
A family member can control the investments while a professional trustee works under the family member co-trustee’s direction to creatively pay benefits that comply with the many rules to maintain needs-based governmental assistance.
2. The independent trustee and the beneficiaries should meet prior to the death to make sure that they are all on the same page.
Meeting prior to death gives everyone an opportunity to be sure that their expectations will be satisfied. Without a meeting before, there is a greater chance of conflict after death, when the trust cannot easily be changed or adjusted.
3. Anticipate trustee conflict in the trust.
Establish guard rails within the trust to help avoid formal litigation, which is expensive, emotionally damaging to the family and generally completely public when filed with the court. (That is why the Buffett trust litigation is in the headlines.)
If the trustees are in conflict, each trustee typically retains independent counsel, and another independent attorney represents the trust.
With so many attorneys, the cost of such litigation is high. Litigation can also injure family relationships, and it is often much easier to begin than to finish or resolve.
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Perhaps the most common first step is to provide for a “tie breaker” if the two co-trustees cannot agree or are deadlocked. The co-trustees each explain their respective positions to the tie breaker. The tie breaker is authorized to resolve that dispute, and then the co-trustees are duty-bound to follow the tie breaker’s decision.
The tie breaker does not actually act as a trustee or co-trustee other than to resolve the disagreement between the co-trustees.
You will want to identify alternate tie breakers if the designated tie breaker is unable or unwilling to act. An independent professional is an excellent choice for a tie breaker.
4. Consider including the power to remove a co-trustee.
Consider if it is appropriate for the primary beneficiary (Slagsvol, in this case) to be allowed to remove and replace the independent co-trustee with a different independent co-trustee. If the primary beneficiary is not trusted to make good financial or other decisions, then this power may not be appropriate.
When appropriate, we may require a professional trustee to fulfill this role, especially if we are concerned about the financial maturity of the primary beneficiary.
In the Buffett case, Slagsvol is the primary beneficiary, and there is no indication that she might abuse this power. The apparent failure of the current co-trustee to account for assets and income appears to be problematic.
A 1% return on investments, at first blush, does not appear to be a very good result in today’s markets. There may, however, be unstated reasons for that 1% rate of return.
5. Include detailed compensation provisions for the independent (nonfamily) co-trustee.
Limit professional fees to a percentage of the assets, an hourly rate or even lump-sum amounts. Care must be taken to ensure that the limitations are reasonable, or no professionals will accept the project.
A trustee who is also a beneficiary is often less concerned about compensation because what they receive is often not taxable. The co-trustee’s compensation is taxed as ordinary income.
If there are multiple beneficiaries, the trustee beneficiary may be more concerned about compensation because it will be paid before splitting the shares for distribution to the beneficiaries.
In conclusion
While the specifics of Buffett’s estate dispute are unique because of his considerable wealth, the underlying lessons offer valuable guidance for anyone establishing a trust.
Careful consideration in selecting co-trustees, proactive communication among all parties, built-in mechanisms for resolving conflicts and clear provisions for trustee compensation are essential steps to help ensure that a trust achieves its intended purpose.
By learning from a high-profile challenge like this one, high-net-worth individuals can better protect their legacies and their loved ones from future disputes.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.