Letter of Wishes and Trust – How They are Used

Elaine King

Letter of Wishes and Trust – How They are Used

Letters of wishes are helpful to people who create long-term trusts as means for providing guidance about how the trustees make distributions to beneficiaries. They’re written instead of legal requirements and are growing more popular in the U.S. Letter of wishes, sometimes called a “family values statement” or “statement of intent,” can be shared with the trustees and beneficiaries to provide them an insight into your legacy plan. A letter of wishes doesn’t form a part of the Will or Trust document but are usually kept with a Will or Trust Deed.

Why and How to Use a Letter of Wishes?

Letters of wishes may come in various forms and used in many different ways. For example, the “head” of the family can use a letter of requests to write down and convey a philosophy of conservation for future family generations. One matriarch used it for this purpose, and her message is reread every year at the annual meeting. In the letter, the trust’s beneficiaries are asked to perceive themselves as stewards of the family fortune, not to take more than they need, and to pass the rest forward.

The letter of wishes used in this way can help establish a strong family tradition, set expectations, and get everybody to rise to the occasion. It gives the person an opportunity to express their wishes of different matters using an informal language (such as one in a Will.) This way, Trustees and Executors (people carrying out the wishes) are given guidance, so they know they’re doing what the person wanted.

How to Write a Letter of Wishes?

  •        Be practical. The trustee’s ability to carry out the wishes needs to be considered. It often happens that they don’t have enough daily contact to monitor behavior. In that case, reach out to your estate-planning attorney to see what arrangements can be made.

  •        There is a chance that the heirs may see the letter of wishes. If they find it, how might they feel about it? You need to consider how your children may think upon discovering a letter in which you explain how disappointed you are with their lifestyle or thinking them incapable of handling business or finances.

  •        If you don’t want your legal advisor to write your letter, at least have them review it, so you avoid different unintended consequences.

  •        Keep the letter simple. The simpler it is, the less likely you’ll have to amend or revise your letter of wishes. Update and review it every 2-3 years.

Letters of wishes are there to provide useful information to people who are carrying out your preferences and are not legally binding. They remain personal to the Trustees, while the Beneficiaries can rarely force the Trustees or Executors to disclose the content of the letter. The key thing about a letter of wishes is that it allows you to let the most important people in your life your real thoughts and hopes that are not always evident from a formal Will document.  A family business advisor can also help you ensure the letter is aligned to your family’s long term goals.

Elaine King, CFP is an expert on family enterprise consulting, creating strategies for wealth planning, family governance, and financial education programs.

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Elaine King - Family and Money Matters™ 2021