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Memorandum of Wishes – Key Considerations for Settlors and Trustees

Memorandum of Wishes – Key Considerations for Settlors and Trustees
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Memorandum of Wishes – Key Considerations for Settlors and Trustees

A memorandum of wishes, also referred to as a letter of wishes, is a private document in which a settlor of a trust conveys their wishes to the trustee. This can relate to the treatment of trust fund, beneficiaries or other trust matters.

There are advantages for both the settlor and trustee in creating a Memorandum of Wishes. It allows the settlor to share his personal thoughts and perspective on the trust in writing.

It can be very helpful for trustees, during the lifetime and after the death of the settlor, as it gives the trustee a greater understanding of the settlor’s intentions.

Typically, a settlor will provide a memorandum of wishes to the trustee at the time of establishing the trust. However, a settlor may provide a memorandum of wishes at any time or update a previous memorandum.

Key Considerations

The following points should be considered when completing memoranda of wishes:

Not Binding

It is not legally binding upon the trustee unless it forms part of the terms of the trust. The purpose is to provide guidance to the trustee to assist their decision making and is not binding. It should not detract from the discretionary powers of the trustee.

Related: Factors to Consider Before Accepting a Trusteeship

The Format

There is no prescribed form to a memorandum of wishes and they may be as short or as detailed as the settlor wishes.

Guidance for Trustees

The Trustee of a discretionary trust will have complete discretion over who receives a distribution or benefit from the trust. A memorandum of wishes can provide guidance in this regard.

Related: Momentous Decisions - A Must Read For Trustees

Trustee Consideration

The trustees would be expected to give careful consideration to the wishes of the settlor(s) which is outlined in the memorandum of wishes.

Change in Circumstances

The personal circumstances or needs of the settlor or beneficiaries may change over time. A memorandum of wishes may be used as a way of communicating updated wishes to the trustees to reflect any changes.

Related: 2 Methods Of Settling A Trust

Special Provisions

If a settlor intends for certain persons named as beneficiaries to have priority, this may be conveyed in a memoranda of wishes. The trustee would then be in a position to consider this when deciding whether or not to make a distribution from the trust, either during the lifetime or following the death of the settlor.

In addition, a settlor may express their aspirations for the beneficiaries named in the discretionary trust in terms of education, career or relationships.

Related: 7 Reasons To Set Up A Family Trust

Confidentiality

A trustee is not obliged to disclose a memorandum of wishes to anyone unless by court order in certain circumstances. Disclosing the wishes of a settlor to beneficiaries could lead to friction amongst the beneficiaries so trustees tend to keep this information confidential.

Regular Review

A memorandum of wishes should be reviewed on a regular basis and updated where necessary if it is to provide guidance to the trustees and fulfil the wishes of the settlor.

Related: Purpose Trusts – When Are They Valid?

Storage

Trustees will usually store the settlor’s written wishes with other trust documents for future reference. Having a soft copy on file makes the documents easily accessible for future consideration and will safeguard against destruction or loss.

Conclusion

The creation of a memorandum of wishes as part of an estate plan may provide useful guidance to executors, trustees and guardians expressed outside the terms of a trust of the Will of a deceased.

It is often used as an addition to an overall estate plan. While there is no legal formality, settlors often need guidance with preparing their memorandum of wishes so that can convey the full extent of their wishes with the understanding that they are not binding upon the trustee.

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