This estate-planning genie can grant more than three wishes

Letter of wishes a guide for trustees and executors

In the world of estate planning, a genie is not the only one who could potentially grant you a wish: Your trustee may also be able to do this with the help of a “letter of wishes.”

A letter of wishes is a non-binding document that sets out suggestions to your executors and trustees, providing them with guidance on how to administer your estate and any trusts under your Will or in a trust you establish during your lifetime. A letter of wishes does not create legal obligations on your executors and trustees to follow your suggestions and is not considered a Will or part of your Will or a trust agreement.

Although a letter of wishes doesn’t create a legal obligation on your executors and trustees to carry out your wishes, in making discretionary decisions, it is a relevant consideration that should be taken into account by them.

One of the advantages of a letter of wishes is the flexibility it gives you. Unlike a Will, which must follow certain legal formalities, including for execution, to be valid, a letter of wishes doesn’t have such requirements. It can be updated as many times as required, without having to update your Will.

Guiding trustees and executors

One of the most common uses for a letter of wishes is providing guidance to the trustees of a discretionary trust, whether set up under your Will or during your lifetime.

Discretionary trusts are popular estate planning tools because they take much of the “guesswork” out of what the future may hold. Rather than you having to look ahead and try to guess what a beneficiary’s circumstances may be at the time of your death, you can leave it in the hands of the trustees to determine what is best for the beneficiary based on their actual circumstances at the applicable time, and if and when to make distributions to the beneficiary out of their trust, and in what amount.

This full discretion can be daunting for a trustee, however. A letter of wishes can be used to provide guidelines or a baseline understanding for the trustees about how to exercise their discretion on a number of issues. For example, if your hope is that a beneficiary would use the money they receive to help buy a house, a letter of wishes could set this out even if it means the trustees need to encroach on a significant amount of capital or wind-up the trust early to facilitate such a distribution.

A letter of wishes could also set out administrative considerations, such as who should (or should not) be appointed as a replacement or additional trustee or what investment policies you favour for investments of the assets. Ultimately, a letter of wishes can be as broad or specific as you would like.

This is especially useful when the beneficiary is a minor – your letter of wishes can grow with the child. As the child matures and their needs change, a letter of wishes can easily be updated to reflect these changes without having to make any substantive changes to your Will.

A letter of wishes can also be customized for each beneficiary. For example, if there is a concern that one child may be more of a spendthrift, rather than have more restrictive trust terms for that one child, which may make them feel singled out, you can have a private letter of wishes relaying your concerns to your trustees so that they exercise more caution in determining whether to make a distribution to the spendthrift beneficiary.

A letter of wishes is not only useful for discretionary trusts. Some other popular uses are to provide guidance to a guardian of a minor child with respect to a child’s upbringing, or to set out how to distribute your personal effects among your family members. For further reading, see our blog posts, “Using Letters of Wishes to Guide Your Guardians” (2019) and “Letters of Wishes: Personal Care Matters” (2014).

The letter can also be written to a beneficiary directly. If there is a discrepancy in the amount or type of gifts, whether real or perceived, a letter of wishes to your beneficiaries explaining the rationale behind your testamentary decisions may smooth over any potential conflict.

One thing to remember when using this tool is that a letter of wishes is just that: a list of your wishes. Just because it is written down, it does not mean your executors and trustees are bound to follow these wishes. The executors and trustees will still have the ultimate discretion in making any decisions, but in exercising their discretion, they should take into account your letter of wishes. If you appoint executors and trustees you trust, you will need to rely on this trust and that they will follow your wishes to the extent it is appropriate to do so.

A letter of wishes is a simple and flexible companion document that should also be considered as part of your overall estate plan because of the many benefits it can afford. And unlike a genie, your trustees can grant more than just three wishes!

Stephanie Battista is a partner at O’Sullivan Estate Lawyers. She practices exclusively in estate and trust law, focusing on all aspects of estate planning and estate administration in order to provide clients with sound and helpful legal advice. She advises clients on their succession plan including wills, trusts, powers of attorney and domestic contracts. She also advises executors, trustees, and attorneys on their duties and obligations, and provides guidance through the complexities of the estate administration process as well as estate and trust accounting. This article originally appeared in the O’Sullivan Estate Lawyers blog. Used with permission.

Notes and Disclaimer

The foregoing is for general information purposes only and is the opinion of the writer. It is not intended to provide specific personalized advice on any individual situation, including, without limitation, investment, financial, legal, accounting or tax advice. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate to your particular circumstances.