AALU WRMarketplace 14-19

Letters of Wishes & Other Precatory Guidance in Dynasty Trust Planning

Settlors of discretionary trusts can provide vital guidance to trustees in the exercise of their discretionary powers through the use of non-binding (i.e., precatory) language in the trust agreement or the provision of a separate “letter of wishes.”  Discretionary dynasty trusts may retain substantial assets for many generations after the settlor and those familiar with his or her intentions have passed away. Precatory language in the trust agreement or a separate “letter of wishes” can help bridge the knowledge gap between the settlor and later trustees, perhaps better expressing the settlor’s personal aspirations than the technical language of the trust agreement. Precatory guidance in a trust agreement generally will be disclosed to the beneficiaries and, if incorporated into an irrevocable trust, cannot be revised.  A letter of wishes, however, can be designated “confidential” in an effort to preclude beneficiaries from receiving a copy and can be updated by the settlor.  Accordingly, settlors in some instances may prefer using a letter of wishes for flexibility and to impart highly sensitive information.

Learn more about the vital guidance settlors of discretionary trusts can provide to trustees in the exercise of their discretionary powers in the new Washington Report.

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