Trustee best practice – rethinking settlor wishes

Published May 10, 2018

It’s time to change our thinking on settlor wishes.

While not binding, a well-crafted letter of wishes captures valuable guidance and insight into the settlor’s purposes, intentions and hopes for a trust and its beneficiaries.   That’s what American author James E Hughes Jr calls the “spirit of the gift”.

In their book “The Cycle of the Gift”, Hughes and his fellow authors encourage not only giving well, but also receiving well.  It’s something to consider in working with settlors and beneficiaries of trusts.

Their view is that if the spirit of a gift is understood, it is more likely to enhance the lives of recipients.  Conversely, continued long enough, gifts without spirit can end up becoming subsidies which can in turn reinforce an attitude of entitlement.

On that basis, a letter of wishes provides a wonderful opportunity for settlors of trusts to record the spirit behind their gifts for both trustees and beneficiaries.

Unfortunately, many settlors don’t record their wishes.  When they do, it’s not unusual to see wishes recorded as brief boilerplate statements providing little guidance for trustees (or beneficiaries).

Part of the problem may be that settlor wishes are prepared as part of a suite of technical documents when a trust is first established.  Expressing, capturing and recording wishes from the heart can be a challenge not only for settlors, but also for their busy advisers.

That said, a good set of settlor wishes are a guiding light for trustees and beneficiaries.

For trustees, they are a reference point for decision making, especially when a settlor cannot be consulted.  In that respect, what might a trustee require the settlor wishes to include? (e.g. for managing a challenging beneficiary where there are mental health or addiction issues)

For beneficiaries, if the spirit behind a settlor’s gift is captured, it will likely become a much more purposeful legacy for the beneficiary who receives it.  The power of capturing and reflecting the settlors voice within the letter of wishes cannot be underestimated.

Perhaps we should consider preparing two sets of wishes – firstly, one for guiding trustees on the management of a trust and secondly, one for guiding beneficiaries on the spirit behind their gift.

For anyone looking to influence the expectations of parties in a trust, a good place to start may well be with having a purposeful conversation with the settlors around their wishes.

Don’t leave it until its too late.  Plan with purpose!

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