Letter of wishes: what to put in it, what to leave out, and a worked example

A discretionary trust gives the trustee the power to choose among beneficiaries. The deed says what the trustee may do and never what the settlor would have done. The letter of wishes fills the gap: private, non-binding, and, from good trustees, followed unless there is a reason not to. It has no legal force in any of the seven countries and considerable practical force in all of them; the English courts have held that trustees must take it into account and need not follow it, and that beneficiaries have no automatic right to see it (Breakspear v Ackland, 2008). In the United States its job is often done by a statement of intent inside the trust instrument, and a separate letter is used for the personal guidance the instrument should not carry.

Priorities, not instructions. Who comes first if there is not enough for everyone. What the money is for and what it is not for. What would worry you: a beneficiary in a difficult marriage, a business that should not be sold, a grandchild who should not receive capital before thirty, an addiction the family does not discuss. What the trustees should do in the cases you can foresee, and the principles for the ones you cannot. Instructions ("pay my daughter £2,000 a month") make trustees nervous, because a letter that reads like a deed invites a challenge that the deed was a sham and the settlor never gave up control; the tax authorities read letters of wishes for the same reason.

To the trustees of the [name] Family Trust.
This letter is not binding. I write it so that you understand how I would like you to use the discretion the deed gives you. If circumstances change in ways I have not foreseen, use your own judgement in the spirit of what follows.
Who first.While my wife is alive, her needs come before everyone else's. After that, my three children equally, but equality means over their lifetimes, not in any one year; a child in need should be helped without keeping a ledger.
What for.Education, a first home, health, and starting a business are the things I would want the trust to fund. Consumption is not; a beneficiary's ordinary living costs should come from their own work.
What I would not want.I would not want the family company sold while any of my children wishes to run it. I would not want capital paid to a grandchild before thirty. I would not want the trust used to settle a divorce.
Guidance for cases I cannot foresee.Ask what keeps the family together and the money useful. Prefer the person over the principle. Take advice, but decide yourselves.
I will update this letter when life changes. The most recent letter replaces the earlier ones.
[Signed, dated.]

Read the example against the mistakes below. It names priorities without amounts, it says what the money is for in categories rather than sums, it names the three things that would worry the settlor, and it gives the trustees a rule for the case it did not foresee. It is short enough to be read at every trustees' meeting, which is the test.

• Too specific: amounts and schedules that age badly and read like a deed.

• Too vague: "look after my family" tells the trustees nothing.

• Never updated: a letter from before the second marriage, or from when the grandchild who is now forty was six.

• Contradicting the deed: the letter cannot give what the deed does not allow, and a letter that tries to tells a court the settlor did not understand the deed.

• Not given to the trustees: a letter in a drawer is not a letter of wishes.

• Given to the beneficiaries: a letter that ranks the children, read by the children, does the trust's fighting for it.

The settlor, alone, in their own words, with the lawyer reading it afterwards for contradictions with the deed. At the same time as the deed, and again at every life event and at least every five years, each version dated and stating that it replaces the last. In a testamentary trust the letter is written with the will and kept with it. A letter dictated to the lawyer in the lawyer's language is the commonest failure: trustees can tell, and it does not help them.