The Trustee’s Compass: Drafting a Letter of Wishes That Endures

Family trusts are often described as flexible structures. The flexibility lies in the trustee’s discretion, not in the absence of a plan. A trust deed supplies the legal machinery; a letter of wishes supplies the human context. Used well, it allows a settlor to explain what they had in mind without attempting to control trustees from beyond the grave.

What a letter of wishes is — and is not

A letter of wishes is a non-binding document addressed to trustees. It records the settlor’s hopes, priorities and reasoning. It is not a deed, a codicil or a document that automatically varies the trust. It does not override the trust deed, and it cannot compel trustees to act in a particular way.

Trustees are entitled—and, in practice, expected—to read it. They should consider it when exercising discretion. They are not obliged to follow it. That distinction is not a technicality. If a settlor wants to impose a binding direction, the trust deed must say so, or the deed must be varied. A letter that reads like a command invites conflict between trustees and beneficiaries and may simply be disregarded.

The practical aim is therefore not to bind the trustees but to inform them. A well-drafted letter reduces the risk of misunderstanding, family dispute and decisions made in a vacuum. It gives trustees a sense of the settlor’s values without removing the discretion that makes a trust useful in the first place.

Why it sits alongside the trust deed

The trust deed sets out the legal framework: who the beneficiaries are, who the trustees are, what powers they hold and how those powers may be exercised. The letter of wishes sits beside that framework and explains the thinking behind it. It can answer questions the deed cannot: why a particular class of beneficiary was included, how a family business is expected to be treated, or whether education and housing should take priority over immediate income.

That context matters most when trustees face a decision the settlor never anticipated. A trust deed may permit a distribution for a beneficiary’s welfare, but it will not explain whether the settlor would have regarded a first home as more important than a second degree, or whether a struggling business should be supported for the sake of employees. A letter of wishes can supply that background without pretending to answer every future question.

It is equally important to keep the two documents consistent. A letter that contradicts the deed is worse than no letter at all. If a settlor’s intentions have moved beyond the powers in the deed, the deed should be reviewed rather than relying on a side letter to achieve the impossible.

A practical structure

A useful letter is short enough to be read and specific enough to be useful. A workable structure is:

1. Purpose and principles. Explain why the trust was established and what the settlor hopes it will achieve. Keep this section brief and avoid rhetorical flourish.
2. Beneficiaries and priorities. Identify the people the settlor has in mind and indicate the relative importance of education, housing, health, welfare and long-term financial security. Avoid ranking beneficiaries in a way that creates unnecessary resentment.
3. Business interests. Where trustees hold shares in a family company, explain the settlor’s hopes for continuity, management, employee stability and eventual sale. This is where private client and business succession advice meet.
4. Capital and income. Indicate whether capital should be preserved for future generations or used to support current needs. Explain any preference for property, pensions or other assets.
5. Property and borrowing. Record views on residential property, land, mortgages and guarantees. Trustees need to know whether a particular asset is regarded as a home, an investment or a legacy.
6. Tax and compliance. Note that trustees must take their own tax advice. A letter should not attempt to prescribe tax planning that may become outdated.
7. Communication and review. Say how the settlor would like trustees to communicate with beneficiaries, and when the letter should be revisited.

The family business question

Where trustees hold shares in a family firm, the letter of wishes can be particularly valuable. It can explain why the settlor wanted the business to remain in family ownership, how key employees should be treated, and whether a sale should be considered only after a certain event. It can also warn trustees against taking steps that would undermine management continuity.

But the letter cannot require trustees to keep a failing business alive or to prefer one family member over another contrary to their fiduciary duties. Trustees must act in the best interests of the trust as a whole. A letter that ignores that reality creates tension. The better approach is to explain the settlor’s commercial and family reasoning, so trustees can weigh it alongside proper advice.

When to review

A letter of wishes is not a set-and-forget document. It should be reviewed after births, deaths, marriages, divorces, serious illness, a sale of the family business, a change of trustees, or a material change in tax law. In the UK, Finance Acts and changes to inheritance tax, capital gains tax and trust registration obligations can all affect the assumptions behind the letter. A routine review every two to three years is sensible; an annual check is better where the family or the business is changing quickly.

Reviews should also follow a change in the trustee body. New trustees need to know that the letter exists and where it is kept. A letter that trustees cannot find is little better than no letter at all.

Common pitfalls

Over-prescription is the most common problem. A letter that attempts to dictate every decision will either be ignored or will create friction. Ambiguity is the second: vague references to fairness or family tradition give trustees little to work with. Outdated names, contradictory instructions and poor custody arrangements are also frequent. The document should be dated, signed and stored with the trust deed, while remaining clearly separate from it.

Conclusion

A letter of wishes is a modest document with a serious purpose. It does not replace legal advice, and it does not give trustees a rulebook. It gives them something more useful: the settlor’s reasoning, expressed clearly enough to guide a decision without removing the discretion the trust was designed to preserve. For families who value flexibility without ambiguity, that is a worthwhile balance.

This note is general guidance and not legal advice. Trust documents should be prepared and reviewed with a solicitor familiar with the particular family and its circumstances.