Letter of Wishes

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    It has become common practice for trust practitioners and Will writers to advise clients to create a letter of wishes which clearly lays out how they would like the trustees to administer the trust or exercise overriding powers and how they would like trust funds to be distributed.

    Although such a letter supporting a lifetime settlement or Will trust is not legally binding the letter can be particularly useful to trustees along with providing a certain degree of comfort for the settlor. The letter can provide information to the trustees that is not contained within the trust document (or Will) itself. For example, the trust document will contain a class of beneficiaries but it will not advise the trustees who in that class may have the greatest need for the funds. The trust document will also not give guidance as to when it is appropriate to give distributions, another useful addition to a letter of wishes.

    It is important to ensure that the letter does not conflict with the trust document, by naming additional beneficiaries for example. In those circumstances the trust document will take preference and the trustees will not be able to make payments to anyone not named within the trust itself. The trustees must also consider if the contents of the letter of wishes are ‘unreasonable’. The test for determining what may be reasonable is a subjective test based on the circumstances and it is not an easy job for trustees to establish.

    They must consider all available information and take into account any circumstances prevailing to the trust at the time. The letter may have been written when circumstances were very different and this should be taken into account. As long as the trustees can justify their actions it is unlikely that they will constitute a breach of trust.

    The letter of wishes does not have to be disclosed to the beneficiaries of the trust. This subject has been questioned in case law; in Re Londonderry’s Settlements [1965] it was stated that beneficiaries have a right to see ‘Trust documents’. The discussion of what this actually includes led to the conclusion that letters written to the trustees are not included in the definition and should not be disclosed. This can make it difficult for trustees who have based a decision not to distribute funds to a beneficiary on the letter and cannot disclose its contents to the disappointed beneficiary.

    Subsequent case law has relaxed this strict interpretation and given the trustees more discretion. Trustees do have a duty to disclose the trust deed, subsequent appointments and trust accounts but do not need to disclose agendas and minutes of meetings in which the exercise of their discretion is discussed or any correspondence between themselves or to beneficiaries.

    It should be noted however that the court have established circumstances where the letter of wishes will need to be disclosed and, in the absence of court proceedings, the decision to disclose will be in the hands of the trustees. This is part icularly evident in family proceedings. So while you can advise that the letter of wishes is not automat ically available to the beneficiaries there may be some circumstances which will warrant disclosure.

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    Matt Walkden Will Writer

    About Matt Walkden

    I am a Professional Will Writer and I offer a small number of other products that complement my Will Writing such as Lasting Power of Attorneys (LPA’s), Fixed Price Estate Administration, often called Probate and some Property Products such as changing a family home from Joint owners to Tenants in Common.

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