What liability concerns would drive an airplane homebuilder to scrap their plane?
I understand that the aircraft owner had sought for some time to donate the aircraft. I would presume that he had come to a time in life where he was, or felt he was, no longer able to fly the aircraft, and so was seeking to rid himself of what may have become a burden (hangar fees, etc.).
To quote liberally from the builder/destroyer's daughter who created and uploaded the YouTube video (this is quoted from what she wrote in the video description):

It took him two years to make this decision about his plane. He did actually try to donate it to a couple of aviation schools in the area and the schools politely refused the offer. He also tried to donate to a local museum and was also refused.
He knew when he built the plane he might face this decision one day, but he hoped some of the laws would have changed by that time.
[...]
Mr. Ron Rapp, author of the article “A Tragic Pile of Twisted Metal” and noted blogger on his website The House of Rapp., highlights many reasons my Dad made this decision among others.
A couple months before my dad made his final decision, a local fellow pilot was named in a lawsuit because he sold the plane he built to a man that later crashed and killed himself in the plane. The spouse of the buyer filed the suit and also named other companies who made parts used to build the plane.
Many have commented that he should have used a limited liability entity, such as a LLC or a corporation to sell the plane. However, because the plane was not, at the time of manufacturing, owned in a properly capitalized limited liability entity with a legitimate business purpose and was, in fact, used purely for personal reason, courts would in almost all cases “pierce the corporate veil.” Therefore, this does not offer adequate (or any) protection.

I don't think I can add a whole lot to that. Apparently, he had decided that he was unwilling to take on the liability of letting someone else fly what he had built. In the absence of a party interested in the aircraft for anything other than flight, he chose to destroy it.