This is the second article in a two-part series on using a letter of wishes for a will trust. The first article considered what a letter of wishes should include, from explaining the purpose of the trust to providing guidance on beneficiaries, distributions and wider family circumstances.
A letter of wishes for a will trust can be a valuable tool for trustees. However, not all letters achieve their intended purpose. Poor drafting can create uncertainty, conflict with the terms of the will or make it more difficult for trustees to exercise their discretion properly.
This article examines some of the most common issues that should be avoided and the practical considerations that can help make a letter of wishes more effective.
Reminder: What is a Letter of Wishes for a Will Trust?
A letter of wishes is a private document addressed to the executors, trustees or both. It records the testator’s wishes concerning the administration of their estate or trust.
Unlike the will, a letter of wishes is not legally binding. The trustees should consider it carefully, but they must exercise their own judgement whilst still acting within the terms of the trust and their various powers.
Letters of wishes are particularly common where a will creates a discretionary trust or other trust with some form of discretionary powers. The beneficiaries of a discretionary trust do not have a fixed entitlement to its income or capital. The trustees instead decide which beneficiaries should benefit, when they should benefit and, where permitted by the will, how that benefit should be provided.
What Should a Letter of Wishes for a Will Trust Not Include?
The first article considered the information that may assist trustees when exercising their powers. It is equally important to consider what should be avoided.
A letter that attempts to bind the trustees, contradicts the will or contains outdated or inflammatory information may create more difficulties than it resolves. The following are some of the most common issues to consider.
Attempting to Make Binding Statements
A letter of wishes is non-binding and should not be drafted as though it contains legally enforceable instructions.
Wording such as the following is unlikely to be appropriate:
- “I direct”;
- “my trustees must”; or
- “I require that”.
These suggest that the trustees are required to follow the testator’s instructions. This may be inconsistent with the discretionary nature of the trustees’ powers.
Non-binding or precatory wording will usually be more appropriate. For example:
- “I wish”;
- “I would like my trustees to consider”;
- “I hope that my trustees will”; or
- “I would prefer”.
If the testator wants a particular provision to be legally binding, it may need to be included in the will itself. The will and trust should then be reviewed to ensure that the intended outcome can be achieved.
Contradicting the Will
The letter should be checked carefully against the terms of the will. It should not identify beneficiaries who fall outside the class of beneficiaries or ask trustees to exercise powers they do not have.
For example, a discretionary trust may allow the trustees to benefit only the testator’s descendants. A letter of wishes cannot authorise the trustees to make payments to a friend who is not included within that class.
The position may be different if the trustees have a power to add beneficiaries. However, the letter cannot exercise that power on their behalf. It can only ask the trustees to consider using the power, leaving them to decide whether doing so would be appropriate.
Similarly, if the will requires income to be paid to a surviving spouse, the letter cannot require the trustees to accumulate that income instead.
Where the testator’s wishes are incompatible with the will, the terms of the will may need to be reconsidered.
The letter should also avoid giving directions about property that will not form part of the estate or trust. This may include:
- jointly owned assets passing automatically to the surviving owner under a joint tenancy;
- pension or death-in-service benefits governed by separate nomination or discretionary arrangements;
- life assurance policies written in trust;
- assets already held in another trust; or
- property owned by a company or partnership.
The ownership of an asset should be established before it is addressed in the letter.
Assuming That the Letter Will Always Remain Confidential
Letters of wishes are generally kept private. Unlike a will admitted to probate, they do not normally become public documents. However, confidentiality is not absolute.
Questions about disclosure can arise during trust administration or litigation. In Breakspear v Ackland [2008] EWHC 220 (Ch), the High Court considered the status and possible disclosure of letters of wishes relating to a discretionary trust.
A letter should therefore be drafted on the basis that it might one day be read by a beneficiary or considered by a court. Unnecessary criticism, inflammatory allegations and comments that do not assist the trustees should be avoided.
This does not mean that genuine concerns should be left out. However, they should be recorded carefully, factually and only where they are relevant to the administration of the trust.
Using Offensive or Speculative Language
A testator may have genuine concerns about a beneficiary’s relationships, spending, health, dependency or ability to manage money. These concerns will often be relevant to the way in which the trustees exercise their powers.
However, personal criticism and speculation are unlikely to assist the trustees. They may also cause considerable distress if the letter is later disclosed.
For example, a statement such as:
“My son is irresponsible and his partner is only interested in money.”
is subjective and offers the trustees little practical guidance.
It may be more useful to explain that the son has previously experienced financial difficulties and that the trustees may wish to consider staged payments or the direct payment of expenses rather then distributing to the son outright.
The purpose of the letter should be to provide relevant context and practical guidance, rather than to record grievances.
Imposing Unrealistic Investment Requirements
A testator may wish for the trustees to retain a family home, business, farm or investment portfolio. Whilst that wish may be understandable, the letter should recognise that this may not always be practical.
For example, a single testator may own a property worth £1.2 million which represents the bulk of their estate. A request that the property should never be sold may be unrealistic if the executors or trustees need to raise funds to pay inheritance tax, administration expenses or other liabilities.
The letter of wishes can still record a preference that the property should be retained where practical. It should also acknowledge that the trustees may need to sell it in order to meet liabilities or comply with their wider duties.
Creating Conflicting Versions
Problems can arise where several letters are stored with the will and none clearly states which one represents the testator’s current wishes. The trustees may be uncertain whether a later letter supplements an earlier version or replaces it entirely.
Each new letter should:
- identify the relevant will and trust;
- include a clear date;
- be signed by the testator; and
- be stored securely with the will or estate-planning records.
Although a letter of wishes does not need to revoke an earlier letter in the same way as a new will revokes an earlier will, it is helpful to state whether it replaces any previous version.
Superseded letters should be removed from the active records, clearly marked as no longer current or destroyed. This reduces the risk of the trustees having inconsistent guidance.
Overlooking Review and Consistency
A will should be reviewed regularly. The same principle applies to any letter of wishes for a will trust.
Regular review may be particularly important where the estate passes into a flexible discretionary trust. That flexibility may reduce the need to amend the will whenever personal circumstances change. However, the accompanying letter should continue to reflect the testator’s current wishes.
A review may be appropriate following a significant family, health or financial event.
Trustees may not be fully aware of family circumstances, particularly where professional trustees are appointed. If relevant developments are not recorded, they may be unable to take the testator’s current wishes fully into account when exercising their discretion.
Each review should also confirm that the letter remains consistent with the will. If the will is amended or replaced, the letter should be reviewed at the same time.
Conclusion
A letter of wishes for a will trust can be extremely useful, but only if it remains consistent with the will and respects the trustees’ discretion. Attempts to impose binding instructions, contradict the trust terms or include unrealistic expectations are unlikely to achieve the intended outcome.
The most effective letters are clear, practical and regularly reviewed. They provide helpful guidance whilst recognising that circumstances may change over time.
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This article is provided for general information only and does not constitute legal advice. Any advice, wording or clauses referred to are illustrative and should not be relied upon as precedent without full consideration of the client’s circumstances, the will as a whole, and the law in force at the relevant time.
