• Kylie Simmonds-Cox

Why should I leave a Letter of Wishes?

It is common practice for a Settlor (the person creating the Trust) to give the Trustees guidance on how they want the Trust to be managed and how the Beneficiaries should be looked after, this is especially important in the context of children with special needs. This guidance is recorded in what is known as the Letter of Wishes.

It is important to understand that the Letter of Wishes is not legally binding on the Trustees, it is a mere wish and is intended to provide guidance. This letter will become a very important and practical tool for the Trustees and will help guide them in reaching decisions.

Tip: Make sure the Letter of Wishes is signed a couple of days after the Trust Instrument to prevent any suggestion that the two documents should be read together as one document.

By keeping it as a separate document, it provides more confidentiality. Many people will question how private their Letter of Wishes is and there have been many challenges over the time. In Breakspear and others v Ackland [2008] EWHC 220 (Ch), the beneficiaries had sought full disclosure of the Letter of Wishes but the Trustees refused their request. The judge ruled that the disclosure of a Letter of Wishes is primarily a matter for the Trustees, who had in fact acted properly. In addition, it can provide more flexibility. The Letter of Wishes can be changed or replaced by the Settlor at any time as and when their own or their family's circumstances change. It is important that the Letter of Wishes is reviewed as much as possible and kept up-to-date.

But should the Trustees blindly follow the Letter of Wishes? In the Case of Re Esteem Settlement [2003] JLR 188, the Royal Court of Jersey confirmed that a trustee may accede to every request of a Settlor without departing from its fiduciary duties: "A lack of any refusal may of course be indicative of the fact that the trustees have abdicated their fiduciary duties and are simply following the wishes of the Settlor without further consideration. But .... a lack of any refusal may be equally consistent with a properly administered trust where the Trustees have in good faith considered each request of the Settlor, concluded that it is reasonable, and concluded that it is proper to agree to such requests in the interests of one or more of the beneficiaries of the trust"

But what should I write in my Letter of Wishes? You need to think about the guidance you want to provide your Trustees, so:

  • Where you think your cash should be invested.

  • Which professional advisers you would like (or don’t want) to handle the funds.

  • Under what circumstances you feel the beneficiaries should be paid out.

  • An explanation as to why certain people may not be benefitting from the Trust.

  • Whether you want the capital distributed quickly or slowly by way of an income.

  • At what age you feel your children will be old enough to receive their inheritance.

  • Whether income for the survivor should cease on remarriage or after a period of time.

  • Whether your family home should be occupied or whether this should be sold to free up capital.

If you would like to talk to us about drafting a Trust and including a Letter of Wishes, then please contact us. Our contact details can be found here.

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