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Trust Law/Level IV · Trusts that care/4.3 Protective arrangements/Lesson 6

Letters of wishes

How a letter of wishes guides trustees without binding them, what it often covers, and when beneficiaries in England and Wales may see it.

Education, not legal advice. Trust law changes from country to country and state to state, and the right structure depends on your situation. Anything you sign should be drafted or reviewed by a qualified lawyer where you live.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. A letter of wishes can be written by the settlor, needs no formalities and costs nothing; dating each new version after births, marriages or illness keeps trustees on the current one. It guides but never binds.
  2. Anything meant to be required must go in the trust deed or will, because a letter of wishes cannot override the trust terms or the trustees’ duties.
  3. Privacy: in England and Wales, Breakspear v Ackland [2008] EWHC 220 (Ch) holds a letter of wishes presumptively confidential, so sensitive family reasons can sit there; a court may still order disclosure, as when trustees seek approval of a distribution.
  4. In US Uniform Trust Code states a beneficiary can demand a copy of the trust instrument under §813, so keeping sensitive guidance in a separate letter may limit what circulates; state rules on letters vary.

MaterialsA copy of the trust deed or will that creates the trust, if you have oneAny existing letter of wishes, if you are the settlor or a trusteeLesson 3.2.4, on discretionary trusts

Wonder

  1. What happens if trustees do not follow a letter of wishes?
  2. Can a settlor change a letter of wishes after writing it?
  3. Can beneficiaries ask to read a letter of wishes?

Explore

  1. A letter of wishes is a document in which a settlor, or a person making a will that sets up a trust, tells the trustees how they hope the trustees will use their powers. It is common in England and Wales and other common-law jurisdictions, especially with discretionary trusts, where beneficiaries have no fixed entitlement (lesson 3.2.4). It is not legally binding. Trustees may take it into account as guidance and often follow it, but they must still make their own decisions and cannot treat it as an order.
  2. A letter of wishes cannot override the trust deed or will. The trustees are bound by the terms of the trust and by their duties, including acting in good faith, for the purposes of the trust and fairly between beneficiaries. If the letter asks for something the terms do not allow, the terms win. Anything the settlor wants to be legally required has to be in the trust document itself; a letter of wishes can only explain how the settlor hopes the trustees’ discretion will be used.
  3. Letters often explain the settlor’s priorities, such as education, housing or help in hardship; describe family circumstances the trustees may not know about; suggest when a beneficiary might be ready to receive capital; and say how the settlor would like a vulnerable beneficiary to be supported. Some also give background for decisions, such as why one person is treated differently. Because the letter guides discretion, clear and practical language tends to be more useful to trustees than rigid instructions they are not bound to follow.
  4. Because a letter of wishes is usually not part of the trust document, it can generally be updated or replaced without the formal steps needed to change a will or trust deed. A settlor may write a new letter after a birth, a marriage, a divorce, an illness or a change in a beneficiary’s finances, and date it so trustees know which is current. Trustees usually keep the latest letter with the trust papers. Formal rules can vary, so some settlors have a lawyer review the letter alongside the trust.
  5. Confidentiality is a key issue. In Breakspear v Ackland [2008] EWHC 220 (Ch), the English High Court held that a letter of wishes is presumptively confidential. Beneficiaries have no automatic right to see it; trustees have a discretion to disclose it if that is in the interests of the beneficiaries and the sound administration of the trust, and the court supervises that discretion. The judge applied the Privy Council’s approach in Schmidt v Rosewood Trust [2003] UKPC 26, which treats disclosure as part of the court’s supervisory jurisdiction rather than a beneficiary’s property right.
  6. In Breakspear, the trustees’ refusal to disclose was found to be a proper exercise of discretion at the time, but the court ordered disclosure because the trustees intended to seek court approval of a distribution, which would need the letter. Trustees also generally need not give reasons for their discretionary decisions. Other jurisdictions, including US states, have their own rules on what beneficiaries may see. This lesson describes how letters of wishes work; it does not suggest whether or how to write one.

Key facts

  • A letter of wishes is generally not legally binding; trustees may take it into account but must make their own decisions.
  • A letter of wishes cannot override the terms of the trust deed or will or the trustees’ duties.
  • Letters of wishes are most often used with discretionary trusts, where beneficiaries have no fixed entitlement.
  • A letter of wishes can usually be updated without the formal steps needed to change a will or trust deed.
  • In Breakspear v Ackland [2008] EWHC 220 (Ch), the English High Court held that a letter of wishes is presumptively confidential and its disclosure is a matter for the trustees’ discretion, supervised by the court.
  • Breakspear applied the Privy Council’s approach in Schmidt v Rosewood Trust [2003] UKPC 26 to disclosure of trust documents.

Exercise nine, six, three, one

9CollectList up to 9 life changes that could affect how a settlor hopes trustees will use their discretion (some lists are shorter), such as a child turning 18, a job loss, a marriage, a divorce or a grandchild’s medical need.
6ClusterSort them into 6 categories: everyday needs, education, health and disability, housing, family relationships, and long-term or legacy plans.
3DistillReduce the 6 categories to 3 groups: changes a letter of wishes could address, changes that would need the trust document itself to be changed, and changes you are unsure about.
1CrystallizeWrite 1 sentence explaining, in your own words, the difference between what a letter of wishes can do and what the trust document does.

Fact check

Dates, figures and claims checked against the published sources listed below.

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