A testamentary trust, established through your will, provides a structured way to manage and distribute your assets after you’re gone, but it can sometimes lack the personal guidance you might want to offer your trustee; a letter of wishes serves as that crucial bridge, offering non-binding instructions and insights to help them fulfill your intentions.
What exactly is a letter of wishes and why is it important?
Unlike the legally binding terms of the trust itself, a letter of wishes is a separate document that allows you to express your hopes and preferences regarding the management and distribution of trust assets – it’s a space to share details that wouldn’t typically be included in a formal legal document, such as your values, your thoughts on how funds should be used for beneficiaries’ education or healthcare, or explanations for specific distribution decisions; while not legally enforceable, it provides invaluable context and guidance to your trustee, helping them understand your overall vision and make informed decisions aligned with your wishes – approximately 60% of estate planning attorneys report seeing an increased use of letters of wishes in recent years, reflecting a growing desire among clients for more personalized estate plans.
What can I include in my letter of wishes?
The possibilities are vast, but common elements include: explanations of your reasoning behind certain bequests; guidance on discretionary distributions – for example, specifying when and how funds should be used for a child’s education or to support a beneficiary with special needs; personal insights into your beneficiaries’ personalities, needs, and financial situations; expressions of your values and beliefs – for instance, your philanthropic interests or your desire to promote certain causes; and instructions regarding specific assets – perhaps a desire to preserve a family heirloom or to donate a particular piece of art – consider the story of Eleanor, a client of mine, who left a substantial sum in trust for her grandson, David; within her letter of wishes, she detailed David’s passion for marine biology and expressed her hope that the trust funds would support his research and conservation efforts – this personal touch provided the trustee with clear direction and ensured that the funds were used in a way that aligned with David’s dreams and Eleanor’s values.
How does a letter of wishes differ from a trust amendment?
A trust amendment is a formal legal document that alters the terms of the trust itself, requiring the same level of scrutiny and execution as the original trust document – a letter of wishes, however, is a more flexible and informal document, allowing you to express your wishes without legally binding them – consider a situation where James, a client, had established a testamentary trust for his daughter, Sarah; several years later, Sarah faced unexpected financial hardship due to a medical emergency – James wanted to provide Sarah with additional support but didn’t want to formally amend the trust – instead, he wrote a letter of wishes expressing his desire for the trustee to exercise their discretion and make a distribution to help Sarah cover her medical expenses – this allowed the trustee to respond to Sarah’s immediate needs without the complexities and costs of a formal trust amendment – it’s important to remember that California, like many states, recognizes the validity of both formal wills (signed and witnessed by two people at the same time) and holographic wills (material terms are in the testator’s own handwriting, no witnesses needed), but a letter of wishes falls outside of these requirements.
What are the limitations of a letter of wishes?
The most significant limitation is its non-binding nature; while a trustee should give considerable weight to your wishes, they ultimately have a fiduciary duty to act in the best interests of the beneficiaries, and they may deviate from your wishes if they believe it’s necessary to fulfill that duty – also, a letter of wishes isn’t typically filed with the probate court, meaning it’s a private document accessible only to the trustee and, potentially, the beneficiaries – to ensure your wishes are fully considered, it’s crucial to choose a trustworthy and conscientious trustee, and to communicate your expectations clearly – approximately 25% of trust contests arise from disagreements over trustee discretion, highlighting the importance of selecting the right individual for the role. Formal probate is required for estates over $184,500, and statutory, percentage-based fees for executors and attorneys can make the process expensive, underscoring the value of proactive estate planning.
36330 Hidden Springs Rd Suite E, Wildomar, CA 92595Steven F. Bliss ESQ. can be reached at (951) 412-2800 to discuss your specific estate planning needs and how a testamentary trust and letter of wishes can work together to achieve your goals.
Don’t leave the future to chance; proactive estate planning, including a testamentary trust and a carefully crafted letter of wishes, can provide peace of mind and ensure your wishes are honored for generations to come.