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Wealth Planning

Family gathering have you wondering how to help the next generations?

Perhaps it’s time to write a “letter of wishes”—or to update a letter you already have in place.  


Summer family gatherings can create opportunities for you, as a parent or grandparent, to enjoy and maybe get to know the younger members of your family just a little better. It’s a good time to learn more about the jobs they hold, friends they’ve made, dreams they have—and more.

With this new understanding, you might be inspired to review your estate plan, will and trusts to see how you might help them. 

Of course, you cannot change any irrevocable trusts you’ve already created (for the most part).1 But you can offer substantial guidance to the trustee you appointed and, if you like, to the beneficiaries you hope to help by offering them a letter of wishes (also sometimes called a “statement of intent” or “family values statement”). 

If you already have a letter of wishes in place for the trusts you’ve created, does it need updating? If you have not created a letter of wishes yet, is it time you wrote one?

What exactly is a letter of wishes? And how does such a letter relate to a trust?

A trust agreement is a formal document that is legally binding. That is why a good estate planning lawyer will advise you to make its terms fairly general. After all, neither you nor the lawyer drafting it can know precisely what situation the trustee and your beneficiary will be facing in the years to come when funds are being distributed.

So for example, many U.S. trust agreements will order trustees to provide for the “health, support, maintenance and education of beneficiaries.”   

In contrast, a letter of wishes is not legally binding. This letter will travel alongside a trust agreement for as long as the trust exists. It is general guidance that you as a trust creator should offer to help the trustee to better understand your intentions, your values and perhaps your beneficiary.

This message can be for the trustee’s eyes only—or it can be open to your entire family. You decide.

For example, your letter can simply explain to a trustee what you meant by “education,” as one person’s idea of education might be a Ph.D. in economics, while another’s might be a yoga class. 

Or your letter could be a wide-ranging philosophical statement.

One matriarch used her letter of wishes to convey her philosophy that beneficiaries should “take only what you need and pass the rest on.” Written more than 50 years ago and reread every year at the family’s annual meeting, the letter asks the trust’s beneficiaries to view themselves as stewards of the family fortune. The letter advises them to draw on trust funds only to help them with their lives’ basic building blocks and to feel responsible for conserving the trust assets for future generations.

The trust officer who handles this trust says that the annual reading of this letter is always a moving occasion: “This letter of wishes establishes a tone—setting expectations—and over the years, everybody has risen to the occasion. The family takes it extremely seriously. The letter of wishes helped create a strong family tradition.”
 

How do you create a letter of wishes?

Because we serve as a trust bank and are often named as trustee, we have seen many letters of wishes—and how effective they can be—across the world. Here’s a quick look at what a letter of wishes might say and do; as well as six recommendations on how best to create one.

Some letters of wishes run to 20 pages and sound like contracts; others read more like intimate family messages. Most are about two pages long and very straightforward.

If you think you might like to write—or update—a letter of wishes, we recommend that you:

  1. Ask us for examples. We’ve seen a wide range of letters of wishes, and can offer you samples and templates you might find inspiring. 
  2. Make sure your legal advisors write, or at least review, your letter of wishes. You don’t want your letter to create unintended consequences.
  3. Write your letter with the understanding that it cannot change your original trust document. The original trust document is a legal agreement that will take precedence.
  4. Keep in mind that your heirs might someday, somehow, see that letter of wishes. Consider how a beneficiary might feel discovering in a letter of wishes that his parents were disappointed with his lifestyle and thought him incapable of handling his finances.  
  5. Be practical: Consider your trustee’s ability to carry out your wishes. Trustees often do not have enough daily contact to closely monitor behavior. If you feel such oversight may be necessary, speak with your estate planning attorney about other arrangements that might be made.
  6. Remember that simple letters of wishes, kept up-to-date, may serve your intentions best. The simpler the language and suggestions, the less likely you may feel compelled to revise or amend your letter of wishes. It’s a personal choice. J.P. Morgan Wealth Advisors in Asia report that clients typically review and update their letters every two to three years. But, of course, once the trust creator passes, the last letter of wishes will stand. So it is very important to draft each one carefully, for the ages.
  7. Give your letter of wishes to the trustee. It may seem obvious, but it must be said: Make sure your trustee has a copy of your most recent letter of wishes. Trustees generally like letters of wishes because whether your trustee is a global bank or uncle, you are doing them a favor by providing them with a letter of wishes so that they may more effectively carry out your intentions.
     

Popularity—across the world—is growing

Letters of wishes seem to keep growing in popularity. Maybe that’s because there are increasing numbers of sizeable multigenerational (even perpetual) trusts. 

So if you would like to create your “message in a bottle” that can speak to distant generations, reach out to your J.P. Morgan team and ask them to help you and your estate planning lawyer craft your own, very personal, letter of wishes.

 

1.Except in very limited circumstances, a U.S. trust creator can’t change the terms of an irrevocable trust he or she has already created. The beneficiaries, the term of the trust and the circumstances under which trust assets can be distributed may be modified, but only by someone else and never in a way that takes away from beneficiaries’ rights they have under that trust instrument.

 

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