What provides a trustee with information about a settlor’s intent in administering a trust? Obviously, the trust agreement is the most relevant document. However, trust agreements are not always clear, do not always provide context, tend to lack more personal statements of the settlor, and raise many other aspects that could benefit from knowing the settlor’s intent. This writing is intended to discuss “Letters of Wishes” which are increasingly used to inform trustees about a settlor’s intentions.[1] The point, largely, is to provide trustees with context needed to administer a trust in conformity with the settlor’s intent.
Although examples of when a Letter of Wishes may be helpful are limitless, some common examples may be:
- If a trust provides that the trustee may make distributions of income and/or principal as the trustee determines in the trustee’s discretion, did the settlor intend for the trustee to be liberal or conservative in the exercise of that discretion?
- Alternatively, if the trust provides that distributions may be made for the health, education, maintenance, and support of the beneficiary, what do these terms mean to the settlor? Is “education” just attendance at primary/secondary schools, colleges, and universities? Alternatively, would “education” include a year of backpacking abroad by the beneficiary ostensibly as a learning experience, learning a new skill such as flying lessons for a beneficiary looking to enter the aviation industry, or other non-traditional schools? Is “maintenance and support” merely as the beneficiary was living when the trust was established, or a more lavish lifestyle adopted later?
- If the trust is for a settlor’s surviving spouse where children are remainder beneficiaries, is the trustee to consider the interests of the spouse as superior to the interests of children as remainder beneficiaries? Alternatively, is the primary purpose preservation of principal for the children?
- There may be important instructions based on a beneficiary’s unique circumstances. For example, a beneficiary may have suffered from addictions making it important for the trustee to pay the beneficiary’s expenses rather than distributing funds directly to the beneficiary. A beneficiary’s spouse may be especially entitled, irresponsible, demanding, etc., such that the trustee should be cautious about requests for distributions which may be coming from the spouse rather than the beneficiary. Of course, these are just examples.
In many cases, a trustee may be familiar with many of these items. However, that is often not the case. Further, in dealing with beneficiaries, the trustee may benefit from a clear written statement expressing the settlor’s intent (i.e. demands for an explanation why something was or was not done). A Letter of Wishes can be a useful tool for these and other purposes.
What is a Letter of Wishes and Why to Use?
The law regarding Letters of Wishes is sparce in the U.S., although the law regarding Letters of Wishes is more prevalent in England and other Commonwealth countries. Currently, there are just two states, Delaware and New Hampshire, with statutory provisions related to Letters of Wishes.[2] As a result, there may be no precise definition of a Letter of Wishes. However, there are common elements.
A Letter of Wishes may be defined as:
- “A written communication from the settlor to the trustee designed to offer the trustee of a discretionary trust some guidance in the exercise of his discretion.”[3]
- “A tool used by the settlor of a trust to provide additional information to the trustee (and other fiduciaries) of that trust. The instrument contains guidance or additional information to be considered by the fiduciaries when exercising their discretion while administering the trust… The goal is to share insights regarding what the settlor would have done themself under similar circumstances… Despite its insights, a letter of wishes is not intended to be binding on the trustee. Instead, it is merely precatory in nature.”[4]
- “A letter or statement containing precatory language that also provides insight into the settlor’s intent without becoming part of the mandatory trust language.”[5]
- “A record that: (A) is not a trust instrument; (B) is created by a settlor; and (C) contains precatory language.”[6]
- “Any separate writing created by a trustor that makes specific reference to a governing instrument of a trustor and contains statements regarding the trustor’s intent regarding the governing instrument, but is not itself a governing instrument.”[7]
I believe the themes of these and other definitions appear to indicate a Letter of Wishes primarily consists of a few criteria whereby the Letter of Wishes is: (1) a written communication; (2) from the settlor to the trustee; (3) separate from the trust agreement; (4) intended to provide additional information to the trustee; and (5) precatory or non-binding in nature. As stated above, these criteria are not necessarily formalized into a recognized standard except where adopted by statute. Therefore, these are my impressions only. However, in discussions with practitioners, I believe this also represents the general consensus among trust professionals.
Given the lack of statutory authority, uncertain definition, and varying potential applicable standards, why would we suggest that settlors use Letters of Wishes? Why not just provide a statement of intent within the body of the trust agreement itself? A non-exclusive list of reasons I believe Letters of Wishes can be preferable includes:
- The Letter of Wishes is in the words of the settlor. Trust agreements are typically drafted by attorneys and can be very dense, dry legal documents. A Letter of Wishes typically can much better convey the feelings, emotions, and desires of the settlor. This can have a number of benefits, including that beneficiaries may be more inclined to accept a trustee’s decisions without controversy if they read their own family member’s words supporting that decision (this, of course, is not universal).
- A Letter of Wishes may be amended over time, subject to further discussion below. There are explicit requirements for trusts to be modified, reformed, or decanted. Those requirements can be cumbersome and require beneficiary consent. However, a separate Letter of Wishes, as being separate from the trust agreement, can be modified without these formalities. Further, this may reduce the need to engage attorneys in handling amendments.
- A Letter of Wishes may contain statements better made outside the trust agreement. As indicated above, there may be intentions related to a beneficiary’s history of addiction, a lack of trust for a beneficiary or their spouse, confidential medical information, etc. Trust agreements may be provided to third parties interacting with the trustee and, in most jurisdictions, all beneficiaries have a right to a copy of the trust agreement (see below for more discussion regarding beneficiaries’ rights tothe Letter of Wishes). A Letter of Wishes may be a way of providing information to a trustee that does not disclose that information more broadly than necessary.
These are merely a few of the common reasons why a Letter of Wishes may be more beneficial than expressing relevant intentions in the trust agreement.
Legal Issues
With Letters of Wishes only being codified in two states and there being very little U.S. case law addressing Letters of Wishes, there are several legal questions that are not yet fully developed.
Is a Letter of Wishes part of the trust agreement?
In the definitions above, it seems clear that a Letter of Wishes is intended to be separate from the trust agreement. That does not mean, however, that the Letter of Wishes is not part of the “terms of a trust” which may include other information “established by other evidence that would be admissible in a judicial proceeding”[8] (more on admissibility below). A “trust instrument” is “an instrument executed by the settlor that contains terms of the trust, including any amendments thereto.”[9] As such, to the extent a Letter of Wishes would be admissible in court, it may constitute part of the trust terms and trust instrument to be administered according to the Uniform Trust Code which has implications regarding trust modifications, non-judicial settlement agreements, contests, trustee removal, trustee compensation, and other items.[10]
Beyond the technical definitions in statute, a Letter of Wishes may be incorporated into the trust agreement by reference, i.e. by including a provision in the trust agreement specifically citing to a Letter of Wishes. “A writing that is not valid as a will but is in existence when a will is executed may be incorporated by reference into the will if the will manifests an intent to incorporate the writing and the writing to be incorporated is identified with reasonable certainty.”[11] Based on this language, however, the Letter of Wishes would need to be in existence when the trust agreement is executed, making Letters of Wishes created later incapable of satisfying this requirement. Would amendments to the Letter of Wishes, properly referenced and in existence when the trust agreement is signed, satisfy this requirement? I find nothing definitive, although the laws of a particular jurisdiction may have addressed a similar question in other contexts.
When must the Letter of Wishes be drafted and when is intent tested?
As indicated above, to satisfy the requirement that a Letter of Wishes be incorporated into a trust agreement by reference, it must be in existence when the trust agreement is exercised with uncertain results as to later modifications. Beyond that, there is a broader question about when intent is tested.
Another important concept in this regard is the question whether intent is to be tested at the time the trust is formed or funded versus at the time a Letter of Wishes is drafted, which may be many years later. According to the common law, the relevant intent is based on the settlor’s intent “at the time of the creation of the trust.”[12] This is codified into the Delaware statute which states that the Letter of Wishes ““may be written at the time of the creation of the trust or subsequent to that time, but must reflect the trustor’s intent contemporaneous with the execution of the governing instrument… reflected in facts and circumstances known… or not known or anticipated by the trustor.”[13] Therefore, while a later writing may be relevant, later formed intentions may not be validly considered by a trustee in trust administration. Letters of Wishes drafted after the trust, or modifications to Letters of Wishes, may still remain important to inform the trustee of relevant factual information or to express the settlor’s intentions in existence at the time the trust agreement was executed as applied to evolving circumstances.
Is a Letter of Wishes admissible in a court proceeding involving the trust?
Referenced above is the notion that admissibility is relevant in defining “terms of a trust.” That said, it may be that many settlors are not concerned with the Letter of Wishes fitting within that definition. Regardless, should there be a controversy regarding trust administration, settlors presumably would desire for their intentions to be considered by courts adjudicating those controversies.
Some typical constraints on the admissibility of Letters of Wishes in court proceedings are the hearsay rule and the parol evidence rule.[14] In both of these contexts, the law has largely developed to support admissibility. Regarding the hearsay rule, there generally is an exception for a “declarant’s then-existing state of mind (such as motive, intent, or plan).”[15] That may not apply in all situations but will in many. With respect to the parol evidence rule, which generally disallows admissibility of extrinsic evidence other than to clarify an ambiguity (i.e. if the trust agreement is unambiguous on the relevant point, then no extrinsic evidence would be admissible), the law has developed to allow the trust terms to be modified to conform to the settlor’s intent even if the trust is unambiguous.[16] As such, at least to the extent extrinsic evidence may be important to understanding settlor intent in trust reformation proceedings, Letters of Wishes should be admissible in most jurisdictions notwithstanding the parol evidence rule.
Are beneficiaries entitled to a copy of a Letter of Wishes?[17]
Settlors may desire for a Letter of Wishes to remain confidential, especially when the settlor expresses feelings or intentions about a beneficiary that are very personal and sensitive in nature. Other than jurisdictions with silent trust statutes, there may be little current ability to keep a Letter of Wishes out of the hands of a beneficiary affected by its terms. The common law has developed, and Uniform Trust Code drafted, to provide substantial rights to beneficiaries in being provided “material facts necessary for them to protect their interests” and the trustee should provide, upon request, “information related to administration of the trust.”[18] It may be possible to limit this information to a beneficiary affected by the terms of the Letter of Wishes, rather than all trust beneficiaries. However, it seems likely that a beneficiary will be entitled to see a copy when there is some effect on the beneficiary. Likewise, in trust litigation, a Letter of Wishes should be discoverable.
Can a Letter of Wishes cause trust assets to be taxed in the settlor’s estate?
A serious consideration in dealing with Letters of Wishes is whether a Letter of Wishes can cause assets of a trust to be pulled into the settlor’s taxable estate. If a settlor retains “the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom,”[19] then those assets are subject to inclusion in the settlor’s taxable estate. A settlor attempting to use a Letter of Wishes to designate beneficial rights in assets previously gifted implicates the potential for estate inclusion.
As discussed above, however, Letters of Wishes should be precatory in nature, not binding the trustee to act in accordance with its terms. When that is the case,[20] the trustee will remain bound by fiduciary duties. This should protect trust assets from estate inclusion when those fiduciary duties are legitimate and enforceable.[21] Based on these concepts, it may be critically important in preparing a trust agreement contemplating use of a Letter of Wishes, or the Letter of Wishes itself, to be clear that any directives or intentions stated in the Letter of Wishes are non-binding and subject to the trustee’s binding fiduciary duties to the beneficiaries.
Best Practices
With the landscape surrounding the use of Letters of Wishes being uncertain and potentially varied from one jurisdiction to the next, it is important to be careful in preparing a Letter of Wishes to mitigate against unintended consequences. Although there may be no certain ground rules (other than to the extent applicable in Delaware or New Hampshire in complying with their statutory provisions), certain best practices may be gleaned from the issues discussed in this writing and elsewhere.
A non-exclusive list of some best practices I believe are worth is provided below. Those include that Letters of Wishes should:
- Not conflict with the terms of the written trust agreement, rather expanding, clarifying, or otherwise informing trustees the settlor’s intentions with respect to terms already contained in the trust agreement.
- Specifically refer to the relevant trust agreement(s) so that there is no ambiguity about the settlor’s intention that the Letter of Wishes inform the trustee’s discretion.
- Expressly state that any directives or intentions stated in the Letter of Wishes are precatory and non-binding on the trustee, with the trustee remaining subject to fiduciary duties to act in accordance with the trust agreement.
- When feasible, not attempt to address issues which the settlor reasonably anticipates will be the source of significant controversy, including litigation. Given the uncertain status of the law in most jurisdictions regarding Letters of Wishes, when the settlor expects controversy, it is likely best to incorporate terms that otherwise would occupy a Letter of Wishes within the actual trust agreement unless doing so would not be workable (i.e. would require a modification, the requirements for which cannot be satisfied).
- Recite that the intentions stated in the Letter of Wishes relate to the settlor’s intent at the time the trust agreement was executed, even if that intent has later been clarified or otherwise informed by subsequent events. For example, a settlor may not have expressly thought about how some unexpected issue should be handled when the trust agreement was originally executed but, now that this issue has occurred, can confidently inform the trustee how he or she would have intended that issue to be handled by the trustee ab initio.
- Be delivered to the trustee or other third party close in time to its creation by the settlor. This can become important in the event of a challenge to the Letter of Wishes’ authenticity, the capacity of the settlor when the Letter of Wishes was prepared, or other contests. Having a clear paper trail showing that the settlor intended this to constitute a Letter of Wishes at a time when the settlor had mental capacity may be very important later.
- Clearly inform the trustee, and possibly the beneficiaries, how the settlor intends that language in the trustee agreement be interpreted, administered, or applied. This helps the parties understand how words like “education” or “support,” for example, should be read in furtherance of the settlor’s intent.
Of course, these are just some of the important considerations which may be relevant in preparing a Letter of Wishes. Depending on the circumstances or issues addressed in the Letter of Wishes, there may be any number of other important approaches. In any event, the list above is intended to address some of the open legal issues in using a Letter of Wishes in a way that conforms to existing law.
Conclusion
As indicated throughout this writing, there is very little U.S. law regarding Letters of Wishes, leaving several significant legal questions regarding Letters of Wishes outstanding. Regardless, there are several reasons it may be advisable for settlors to use Letters of Wishes as part of their trust planning. There are a number of important advantages that are not available otherwise. Therefore, regardless of some of the current uncertainties, many planners routinely advise settlors to prepare Letters of Wishes.
Settlors should proactively seek to avoid some of the potential pitfalls that can create problems in using a Letter of Wishes. Trust litigation is on the rise, and a beneficiary unhappy with decisions a trustee makes based on language in a Letter of Wishes can trigger litigation. When the Letter of Wishes is clearly authentic, prepared when the settlor had capacity, appropriately delivered to the trustee, supplements rather than attempts to change the language of the trust agreement, informs the trustee about the settlor’s intent regarding the exercise of discretion already held by the trustee, is precatory rather than mandatory, and is based on the settlor’s intent as it existed when the trust agreement was executed, one can hope that most beneficiary challenges will be unsuccessful (i.e. the settlor’s actual intent prevails).
Over time, we almost certainly will see the law develop in this area. For now, since Letters of Wishes remain very useful tools, they should be used. However, that use should be undertaken with careful thought about future consequences. Trustees do not want to be a defendant in a lawsuit merely by following what the trustee believed to be the settlor’s intent, settlors desire for their intentions to be fulfilled, and attorneys want their work to successfully serve their clients’ interests. With careful planning, these goals should be attainable.
[1] Although I will use the term “Letter of Wishes” in this writing, those instruments may sometimes be referred to by other names such as a Letter of Intent, Statement of Intent, or similar terms.
[2] 12 Del. C. §§ 3301(g) and 3315(c); N.H. Rev. Stat. Ann. § 564-B:1-113.
[3] Bove, Alexander A., Jr., “The Letter of Wishes: Can We Influence Discretion in Discretionary Trusts,” 35 ACTEC J. 38 (Summer 2009); and Amy K. Kanyuk, “Trustee Discretion: The Better Part of Valor or Vulnerability?,” 48 Est. Plan. 03 (Dec. 2019).
[4] Brown, Cynthia D.M., and Kim Kamin, “Letter of Wishes,” Planning Techniques for Large Estates 2025, CG210 ALI-CLE 141, May 14, 2025.
[5] Harrington, Carrie, Erica E. Lord, and Susan D. Snyder, “Directed Trust and Other Modifications,” SZ018 ALI-CLE, Planning Techniques for Large Estates 2018, April 25-27, 2018.
[6] N.H. Rev. Stat. Ann. § 564-B:1-113.
[7] 12 Del. C. § 3301(g).
[8] See Uniform Trust Code (“UTC”) § 103(18); Restatement (Third) of Trusts § 4 cmt. a; and Restatement (Second) of Trusts Section 4 cmt. a. In my home state, this is codified in Miss. Code Ann. § 91-8-103(29).
[9] UTC § 103(19).
[10] See, e.g., UTC §§ 111, 405, 411-416, 706.
[11] Restatement (Third) of Property, Wills and Other Donative Transfers, § 3.6.
[12] Restatement (Third) of Trusts, § 4, cmt. a. See also Bishop v. McNeil, 1999 WL 743489 (Del. Ch. Sept. 14, 1999).
[13] 12 Del. C. § 3315(c).
[14] Note that there could also be other objections to admissibility such as proper authentication.
[15] See Fed. R. Evid. 803(3).
[16] UTC § 415 and Restatement (Third) of Property, Wills and Other Donative Transfers, § 12.1 cmt. e.
[17] For a good discussion of this topic, see Alexander A. Bove, Jr., “The Letter of Wishes: Can We Influence Discretion in Discretionary Trusts,” 35 ACTEC J. 38 (Summer 2009).
[18] UTC § 813(a). Codified in Mississippi at Miss. Code Ann. § 91-8-813(a).
[19] IRC § 2036(a)(2).
[20] In this regard, see Phillips v. Phillips, 67 Sickels 197 (1889), where seemingly precatory language was interpreted by a court to create a mandatory obligation on the trustee since the settlor’s intent that the language be followed seemed clear to the court.
[21] See United States v. Byrum, 408 US 125 (1972), and Rev. Rul. 81-15.
