Trustees and family members may face numerous decisions in the years ahead as they work to carry out a wealth holder’s intentions. Letters of wishes not only guide these important choices but provide peace of mind for grantors that their wishes will be carried out in the spirit they intend.

What role can and should letters of wishes play in estate planning? To handle this question are experts at Bessemer Trust. The authors are Lynn Halpern is a managing director and senior fiduciary counsel at Bessemer Trust; Jaclyn Feffer is a managing director and senior fiduciary counsel and Donna Trammell is head of family wealth stewardship at the firm (more on the authors below). The editors are pleased to share this content and invite replies. The usual editorial disclaimers apply. Email tom.burroughes@wealthbriefing.com

Even with a comprehensive trust and estate plan in place, individuals who have worked hard to build and preserve wealth may wonder whether trustees and family members will fully understand the vision and values behind their decisions. Letters of wishes can help inform and empower trustees and families for years to come.

While not a required component of estate planning, these non-binding documents express wishes rather than commands and complement trust and estate plans.

Letters written to trustees can help the trustees stay true to a grantor’s priorities when making distributions to beneficiaries, while letters to family members can help generations of beneficiaries understand family history, the reasons behind decisions, and important values to be upheld for years to come.

Though letters of this kind are not new, they have gained popularity in recent years with the rise of long-term, multigenerational trusts, and the trend toward wider trustee latitude in decision-making. As more wealth holders consider these documents, a careful approach will help letter recipients such as trustees and family members gain a better understanding of recommendations and wishes and strengthen the likelihood that this guidance is carried out as the grantor intends.

Understanding the audience 
Letters are flexible in form and content and highly dependent on the messages conveyed and the intended audience. Whether they’re written for trustees or family, working in lockstep with an advisor can help distinguish the nuances.

Letters to trustees should include broad statements of purpose, followed by specific wishes to help the trustees better execute the grantor’s mission. Examples might include, “I want my children and descendants to follow educational pursuits,” followed by specific wishes, such as, “I want this trust to be used to support each of their college educations.” Areas frequently highlighted for support include education, starting a business, healthcare expenses, or personal milestones, such as buying homes or paying for weddings.

Including additional guidance assists trustee decision-making. For example, gaining work experience might be a priority to help beneficiaries hone their work ethic. Meanwhile, outlining what one doesn’t wish to support is equally helpful. The grantor may highlight entrepreneurship as meaningful work experience, while setting certain career expectations to prevent beneficiaries from living solely off the trust.

Letters to family provide opportunities to tell loved ones about the personal experiences that shaped family values that wealth holders hope will be upheld for generations to come. These might include stories of a first job that stress the importance of hard work, or memories from a humble upbringing that ground families in their roots. Individuals should allocate time to ask themselves important questions such as, “What do I want my loved ones to know?” which invite follow-up reflection on the morals, influences, and experiences that shaped their character.

Striking the right balance 
Because letters are nonbinding, trustees and family members are not legally required to follow their recommendations, so understanding what these letters can and cannot achieve is critical.

Advisors can play an instrumental role in helping individuals avoid over steering and over specifying. For instance, there’s a fine line between expressing beliefs on family, wealth, work, faith, and philanthropy with conviction and pushing beneficiaries towards specific pursuits that may not feel right for them. Instructing younger generations to enter specific careers or volunteer with specific charities could be counterproductive, causing them to overlook the underlying values of hard work and giving back. 

Letters also tend to be more effective when they incorporate flexibility to adapt to economic and other evolving conditions. Rigid details, such as specific dollar amounts to meet certain expenses, may quickly grow outdated.

While letters cannot amend or replace a trust, these documents should complement each other to establish a cohesive plan for trustees and future generations. Inconsistency between the two documents could generate confusion, therefore seeking attorney and advisor review of both documents can be useful to ensure alignment.

Putting letters into action 
Effective letters of wishes will enlighten and guide trustees and families in the future, but there also are valuable opportunities to work them into the present.

Discussing letters with trustees during the drafting process is a useful way to ensure that wishes are straightforward and consistent with other trust documents. Sharing finalized letters with beneficiaries not only provides helpful insight on intentions but allocates time to ask questions that will inform proper decisions in the future.

There are various strategies to incorporate family letters into conversations with children and grandchildren. While one may wish for family members to read their letters after they are gone, it may be prudent to bring certain elements into current conversations. This might include sharing important stories from a letter at family gatherings to set the tone for productive conversations on values or reading letters at the beginning of family meetings to illuminate the opportunities and responsibilities of wealth. Often, these letters become beloved family heirlooms that guide family conversations for generations to come. 

Planning for the future
Trustees and family members may face numerous decisions in the years ahead as they work to carry out a wealth holder’s intentions. Letters of wishes not only guide these important choices but provide peace of mind for grantors that their wishes will be carried out in the spirit they intend.

Experienced wealth planning professionals can help clients carefully craft letters that provide a moral compass for family and a roadmap to help guide trustees today and in the future.

About the authors
Lynn Halpern is managing director and senior fiduciary counsel at Bessemer Trust; Jaclyn Feffer is managing director and senior fiduciary counsel, and Donna Trammell is head of family wealth stewardship at the firm.

Disclaimer
This material is for your general information. It does not take into account the particular investment objectives, financial situation, or needs of individual clients. This material is based upon information obtained from various sources that Bessemer Trust believes to be reliable, but Bessemer makes no representation or warranty with respect to the accuracy or completeness of such information. The views expressed herein do not constitute legal or tax advice; are current only as of the date indicated; and are subject to change without notice. Forecasts may not be realized due to a variety of factors, including changes in economic growth, corporate profitability, geopolitical conditions, and inflation. Bessemer Trust or its clients may have investments in the securities discussed herein, and this material does not constitute an investment recommendation by Bessemer Trust or an offering of such securities, and our view of these holdings may change at any time based on stock price movements, new research conclusions, or changes in risk preference.