Written by Kim Kamin, JD, AEP® (Distinguished) and Cynthia D.M. Brown, JD, STEP
Estate planning today involves more than just drafting technically sound dispositive documents. Clients increasingly want their estate plans to reflect their values, guide future generations, and anticipate evolving family structures. At the same time, trustees, particularly corporate fiduciaries, are administering long-term discretionary trusts under heightened scrutiny in complex regulatory environments.
As attorneys construct trusts with broader distribution standards and intentional flexibility and as family structures become more complex, trust instruments alone are often not the appropriate place to convey the settlor’s nuanced intentions or to help trustees and other trust fiduciaries navigate changing times.
To address this reality, letters of wishes have emerged as a practical and increasingly popular planning tool. If thoughtfully designed, letters of wishes can be extremely effective. If carelessly drafted or inconsistently used, they can create significant problems, such as estate tax inclusion and litigation risks. For estate planning attorneys advising sophisticated families, understanding how clients can design and deploy letters of wishes can be the difference between a smooth trust administration and a turbulent one.
This article explores the role of letters of wishes in modern estate planning, with a particular focus on their benefits in interpreting and administering trusts; best practices for designing them; and strategic considerations regarding timing, including when and how they should be shared. Drawing on recent statutory developments, US and foreign case law, and practical drafting experience, the authors examine how attorneys can incorporate letters of wishes with greater confidence and precision in their planning process.
UNDERSTANDING THE LEGAL NATURE OF A LETTER OF WISHES
To date, two US states, New Hampshire and Delaware, have enacted statutory provisions to help establish a baseline for drafting and using a letter of wishes. Taken together, these statutes define a letter of wishes as a written statement prepared by a trust settlor to provide nonbinding guidance for trust fiduciaries and other powerholders regarding the exercise of discretionary powers granted by a trust instrument. Its purpose is not to direct outcomes but to offer insight how the settlor would have considered discretionary decisions under similar circumstances. The Delaware statute also expressly requires that the letter be delivered to the trustee.
A letter of wishes is precatory in nature. Accordingly, it conveys the settlor’s wishes or requests, not their mandates. It is not a governing instrument, and it cannot amend a trust. Instead, it expresses the settlor’s perspective on how discretion might be exercised in future circumstances. Where the trust language is unambiguous, the governing instrument controls. Where discretion is granted, the trustee must exercise independent judgment, and the letter of wishes can help guide that judgment. It is meant to provide context, background, and a statement of the family’s values and history. When used properly, it enhances, rather than replaces, the fiduciary’s decision-making process.
Letters of wishes are also confidential. Both the Delaware and the New Hampshire statutes expressly provide that a fiduciary has no duty to disclose the letters to beneficiaries. This approach is consistent with longstanding English law for letters of wishes. Beginning with the 1965 case, Re Londonderry’s Settlement, English courts have consistently held that trustees need not disclose the rationale and process involved in their exercise of discretionary powers because it is inherently confidential. On the same basis, letters of wishes are treated as confidential documents, both to preserve the privacy of the discretionary process and to encourage settlor candor.
Letters of wishes are distinguishable from other ancillary documents that may accompany an estate plan. Other ancillary documents may include family mission statements or constitutions, which establish policies and guidelines for family governance; side-instructions for end-of-life care, arrangements at death, and disposition of specific items of tangible personal property; or even ethical wills, which leave behind a nontangible legacy such as wisdom, experiences, memories, or family recipes. While there may be thematic overlap between letters of wishes and other ancillary documents, a letter of wishes serves a distinct legal, functional, and emotional purpose for families. Its power derives from its practical, precatory, and confidential nature, allowing trustees and other fiduciaries to see into the settlor’s mind while retaining their independent decision-making authority.
BENEFITS IN TRUST ADMINISTRATION
Supporting Independent Fiduciary Judgment and Long-Term Trusts
Trust instruments must be formal and legally precise. Letters of wishes, by contrast, can be personal, contextual, and informal. They allow settlors to explain why they chose certain standards and how they hoped those standards would be applied, without freezing such explanations into a binding governing instrument.
For example, a trust instrument may . . .
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