A Letter of Wishes for a Will Trust allows a testator to give guidance to the trustees on how they would like the trust to be administered after their death. Whilst the will contains the legally binding terms of the trust, the letter can provide additional context that would not usually be appropriate to include in the will itself.
The letter is not legally binding and cannot override the trustees’ powers or duties. However, it can be a valuable tool in helping trustees understand the testator’s objectives, family circumstances and reasons for establishing the trust.
When drafting a letter of wishes, there are a number of points that should be considered.
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 Include?
There is no standard format for a Letter of Wishes for a Will Trust and no two letters need to be exactly the same. The content should reflect the nature of the trust, the beneficiaries and the testator’s objectives. There are, however, a number of common areas that are often worth considering.
Identify the Will and Trust
When preparing a Letter of Wishes for a Will Trust, the trustees should be able to identify immediately which will and trust the guidance relates to. The letter should begin by identifying:
- the testator;
- the date of the relevant will; and
- the trust or trusts to which the letter relates.
If the will creates more than one trust, the letter should make clear whether it applies to all of them or only to a particular trust.
As a letter of wishes is non-binding, it does not need to specifically ‘revoke’ a previous letter of wishes like you would with a new will. However, the letter could state this if required. Alternatively, the dating of the letter of wishes being later than an old one is likely sufficient evidence to show which is the later wishes of the testator.
Status and Purpose
The letter should confirm that it provides guidance and does not contain binding instructions. It may ask the trustees to consider the wishes expressed while making clear that they must exercise their powers independently and in accordance with the will.
This distinction is important. The will gives the trustees their legal powers. A letter of wishes cannot extend or replace those powers.
The letter may also explain why the trust was created. The testator’s objectives could include:
- supporting a surviving spouse or partner;
- preserving capital for children or grandchildren;
- protecting a young or vulnerable beneficiary;
- responding to the different financial needs of beneficiaries;
- safeguarding family assets; or
- allowing flexibility as family and financial circumstances change.
An understanding of these objectives can help the trustees make decisions that are consistent with the purpose of the trust.
Priorities Among Beneficiaries
Where several people may benefit, the letter can indicate whether the needs of a particular beneficiary should normally take priority.
For example, a discretionary trust may include the testator’s spouse, children and grandchildren as potential beneficiaries. The letter could explain that the spouse’s housing, care and reasonable living costs should normally receive first consideration during their lifetime. It may then ask the trustees to preserve the remaining assets for later generations, so far as reasonably possible.
The wording should remain flexible. Circumstances can change significantly after the testator’s death and the trustees must remain able to consider the interests of all the beneficiaries.
Reasons for Distributions
The letter can identify purposes for which the trustees may consider using trust funds. These could include:
- training;
- medical treatment;
- purchasing or adapting a home;
- establishing or developing a business;
- responding to an emergency;
- supporting childcare needs; and
- supplementing a beneficiary’s income.
The letter could explain that fairness does not necessarily require identical payments. The trustees may instead consider the individual circumstances and needs of each beneficiary.
Timing and Form of Support
The letter may provide guidance on when and how support should be given. Relevant considerations could include the beneficiary’s age, maturity, financial experience and personal circumstances.
Instead of making a large outright payment to a young beneficiary, the trustees might be encouraged to:
- pay education or housing costs directly;
- make payments in stages;
- lend money on appropriate terms;
- acquire an asset for the beneficiary’s occupation or use; or
- arrange financial education before distributing substantial capital.
Any suggestion must be consistent with the powers contained in the will. A letter of wishes cannot give the trustees a power that they do not otherwise have.
Vulnerable Beneficiaries
If a beneficiary is disabled, lacks capacity, receives means-tested benefits or is otherwise vulnerable, the letter can provide useful background information. It may ask the trustees to consider how a distribution could affect the beneficiary’s benefits, care funding and wider support arrangements.
Any sensitive information should be expressed factually and respectfully. The focus should remain on how the trust may support the beneficiary rather than on labels or personal criticism.
Relevant Family and Financial Circumstances
A letter of wishes can contain information that would not be appropriate to include in the will, which will become a public document after probate. This could include:
- substantial financial assistance previously provided to a beneficiary;
- the source or significance of particular family assets;
- financial dependence within the family;
- concerns about a beneficiary’s ability to manage money;
- reasons for treating beneficiaries differently; or
- confidential wishes on how a family business is run.
Asset Priorities
The letter may record broad preferences concerning the trust assets. For example, the testator may wish for a family business, farm or property to be retained where practical.
Any preference to retain a particular asset should recognise that a sale may later become necessary or appropriate. The letter should provide guidance noting it cannot prevent the trustees from responding to changing circumstances.
People to Consult
The letter may identify people whose views could assist the trustees. These could include a family member, carer, accountant or investment manager.
It should be clear that any consultation is a wish. Responsibility for making trust decisions must remain with the trustees.
The trustees may also be encouraged to obtain appropriate legal, tax, investment or other professional advice when dealing with complex matters.
Review, Signature and Storage
The letter should be signed and dated. It does not usually need to comply with the execution formalities that apply to a will under section 9 of the Wills Act 1837.
The testator should review the letter following any major change in circumstances, including:
- marriage, divorce or separation;
- the birth or death of a family member;
- serious illness or disability;
- a material change in wealth;
- financial difficulties affecting a beneficiary; or
- an amendment to or replacement of the will.
The current letter should be stored securely with the will but not attached to it. The executors or trustees should know that it exists and where it can be found.
Conclusion
A well-drafted Letter of Wishes for a Will Trust can provide trustees with valuable guidance whilst preserving their ability to exercise their discretion properly. It allows the testator to explain the purpose of the trust, provide context about family circumstances and set out priorities for future decision-making.
The most effective letters are clear, practical and flexible. They assist trustees without attempting to control decisions that must ultimately remain theirs.
This is the first article in a two-part series on letters of wishes for will trusts. The second article will consider what should be avoided, including attempts to impose binding instructions, restrictions on trustee discretion, conflicting guidance and other common drafting pitfalls.
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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.
