It is important to appreciate that letters of wishes are not legally binding. They provide guidance for your Executors where you have given your Executors some element of discretion.
Whilst it is perfectly acceptable to draft a letter of wishes yourself, it can be helpful to use a solicitor for this task. A solicitor will be able to prompt you to provide guidance on certain areas, ensuring everything is clear and nothing is left out.
Common reasons for creating a letter include:
Discretionary trusts give your choice of trustees absolute discretion to pay out – or not to pay out. If there are several beneficiaries, they can pay everything to just one, or simply hold the money and pay to none (although the trust should include a condition that they must pay to someone before the end of the trust which cannot continue beyond 125 years).
The idea of a discretionary trust is that they allow the trustees to adapt to the beneficiaries’ circumstances. People often draft their Wills with the current wealth of their children in mind, forgetting that this might change by the time they die. A discretionary trust allows the trustees to hold onto the money where a child is going through a divorce. Alternatively the trustees might make a loan to a beneficiary so that they can benefit without losing the money to creditors.
It is common to provide a letter of wishes to accompany a discretionary trust. Whilst it is not legally binding, it helps the trustees know under what circumstances you would like them to consider making a payment. You might, for example, cover:
- Whose wishes should be taken into account before making a payment?
- What should happen if the beneficiary remarries or is cohabiting?
- Should payments be largely equal, or can they be unequal?
- Should any lifetime gifts be taken into account?
- Are there any purposes in particular that you would like to support? (e.g. education, travel)
- Are there any circumstances where you would definitely not want the trustees to pay out? (for example, if the beneficiary relapses into their addiction)
- What is your attitude towards investment risk and diversification of the trust fund?
These are just a few matters out of a longer list that we would recommend you cover. There are also additional considerations where the trust is to hold a business interest.
Trusts for minors
Trusts for minors are not entirely discretionary because there is no question that the minor will inherit at the chosen age – usually 18, 21 or 25. However, the trustees do have the discretion to pay income or capital whilst the minor is younger. A letter of wishes is useful because it sets out your views on what payments should be made for.
For example, would you be happy for the trustees to give the minor’s family a generous payment for a family holiday? Or should the payments be largely confined for educational purposes?
We are often asked to draft the trust itself as ‘for educational purposes only’. We would never recommend doing this. It is very difficult to predict under what circumstances the child would benefit from funds. For example, what if the child needs surgery unexpectedly and there is a long waiting list? Would you really want to deny them funds for ‘going private’? Instead of trying to restrict the trust itself, choose trustees who you know will listen to your wishes and act as you would have acted. Draft a letter of wishes that states you prefer the funds to be used for education – but that you are happy for your trustees to use their discretion in exceptional circumstances.
Care of minors
If you have minor children, you might also like to provide some guidance for guardians or a surviving parent on how you would prefer them to be cared for and raised. For example, perhaps you have raised the child with certain religious beliefs, hobbies or dietary choices. Whilst the letter is not binding, it will be helpful for those left behind to understand what matters are important to you.
People sometimes leave personal possessions in their Will but if the possession is replaced, the gift will fail.
Jess makes a Will dated 2020 leaving her silver watch to her sister Holly. In 2021, she loses the watch and buys a new one.
Jess dies in 2022. The gift to Holly fails. The gift relates to the watch she owned at the time of making the Will, which now does not exist.
One way to get around this is to draft the gift as ‘My silver watch, or any other watch I may own at the time of my death’ – but what if you own several silver watches? Or what if the watch (which was worth £69) was replaced by a Rolex (worth £2,000)? Would you still want the same person to inherit?
Another way to deal with this is to draft Codicils – these are like ‘annexes’ to the Will. They are quite simple documents and you can make them using a template, creating a new one every time your possessions change. They do however have to be executed in the same way as a Will (with two independent witnesses) and they do ‘republish’ the original Will, which can cause a little confusion if items have been replaced.
The final option is to leave all your possessions to your Executors with a letter of wishes setting out how they should be distributed. The gift is not a trust – it is absolute – and your Executors could in theory keep all of the possessions. In reality, if you have chosen your Executors well, they are unlikely to ignore your wishes!
The letter of wishes will then set out what you would like the Executors to give, and who they should give it to. The huge benefit of this is that you can change the letter as many times as you like. It does not have to be witnessed so it is very easy to update as you buy and replace items.
Letters of wishes in relation to pets might contain a range of matters, including:
- Your wish that the pet should (or should not) wear an identity tag / collar
- Your wish that the new owner should have pet insurance
- Your wish as to the types of treatment your pet should or should not receive
- Your wishes concerning euthanasia in certain circumstances
- What you would like to happen when your pet dies
- What the new owner should do if they feel no longer able to care for your pet
Leaving someone out of your Will
There is no automatic right of inheritance in English law, unlike the concept of ‘forced heirship’ that you find in many other European countries. We do have ‘testamentary freedom’ to a large extent – that is, the right to leave our property to whomever we choose.
However, this is not absolute. Sometimes, there are people in our lives that we ought to consider.
Some obvious examples include spouses or civil partners and minor children. Those we have cohabited with for a very lengthy period in a ‘marriage like’ arrangement should also be considered. But what of adult children?
Adult children very often feel entitled to their parents’ inheritance and it can come as a bit of a shock if they are not left an equal share (or perhaps nothing at all). Sometimes, there is a very good reason for this. For example, in a case involving an adult daughter, the Court found that the Deceased father had already supported her adequately during her lifetime.
This final category of letters is perhaps the most difficult to draft. In past cases, letters of wishes have sometimes been viewed adversely by the Court where they have contained spite or inaccuracies.
On the other hand, if you have left someone out of your Will, a letter of wishes can be very helpful in the event of a dispute. It can set out exactly why you have done this from a factual perspective. It can be helpful to have a solicitor assist you in drafting this alongside your Will to reduce the risk of a claim being made.