This article argues that while letters of wishes are technically non-binding documents, they play a crucial practical role in how trusts are administered over time.
The Core Problem
Discretionary trust deeds are legally precise but often use broad language (e.g., “health, education, maintenance and support”) that doesn’t capture the settlor’s actual reasoning. When trustees — especially successor or corporate trustees who never knew the settlor — must make distribution decisions without context, inconsistency and disputes can follow.
What a Letter of Wishes Does
It doesn’t amend the trust or bind trustees, but provides context for exercising discretion. It helps trustees answer practical questions like whether to prioritize capital preservation, how to balance competing beneficiary interests, and how much independence beneficiaries should be expected to show.
Key Drafting Principles
- Clarify purpose, not dispositive details — overly prescriptive letters risk being treated as binding instructions
- Write in a measured, forward-looking tone, since the letter may be read years later in unforeseen circumstances
- Review and update periodically while the settlor is alive and has capacity
- Corporate trustees especially benefit from clear guidance, as they must demonstrate reasoned, defensible decision-making
Important Limitations
Letters of wishes cannot override the trust deed, must not conflict with its provisions, and should not create enforceable obligations. They complement robust drafting — they don’t replace it.
Bottom Line
For advisors, routinely preparing a letter of wishes alongside a discretionary trust is a low-cost, high-value governance step that preserves the settlor’s intent across generations and reduces the risk of beneficiary disputes.
Original source: STEP JOURNAL