Dear Trustee: “This is what I prefer…”

Although often misunderstood, trusts are commonly used to plan an estate. With the estate tax exemption over $13 million, the primary advantage of a trust for most clients is no longer minimizing estate taxes, but rather the avoidance of probate. However, trusts often provide only limited parameters for how the assets are to be used for the beneficiaries. A trust may, for example, provide that the trustee has absolute discretion to distribute the assets for the “health, education, maintenance, and support” of certain beneficiaries. Such language does not, unfortunately, provide much guidance to the trustee in exercising such broad discretion.

To provide any additional direction, some families are providing important information regarding how they would like their assets to be used. These written instructions, often referred to as a “letter of wishes”, which although are non-binding, provide important priorities that the parents or grandparents would like the trustee to consider when distributing the trust assets. A letter of wishes can help address a variety of situations that the trustee might otherwise be uncertain of what the grantor (i.e. the person(s) who created the trust) would prefer. For example, a letter of wishes might address:

1. The grantor’s preference that a family cottage be maintained so future

generations can enjoy it.

2. The grantor’s strong belief in the value of a rigorous college education

with no tolerance for mediocre grades.

3. The grantor’s special concern for a grandchild whose parents divorced.

4. The grantor’s preference that those who live beyond their means should

not be rewarded.

5. The grantor’s desire that his son, who has struggled with substance

abuse, have as little funds as possible under his control.

These are just a few examples of guidance that a letter of wishes can address. To provide a trustee with the best opportunity to administer a trust as the grantor would prefer, a letter of wishes is strongly encouraged. To create your own letter of wishes, be sure to consult with an experienced elder law attorney.

This blog post is written by Brett A. Howell, Certified Elder Law Attorney. The blog is written as a service of The Elder and Estate Planning Law Firm, P.L.L.C. This information is for general informational purposes only and does not constitute legal advice. For a consultation to address specific questions, please call (810) 953-3846.