Financial Insights

The Difference A Letter Of Wishes Can Make

We recently discussed the four basic estate planning documents that we feel all responsible adults should execute.  These documents designate someone to make decisions that are legally necessary on our behalf and provide for the efficient administration of our affairs.

There is one more document that has no legal effect, but which we highly recommend and in many cases becomes the most important of all.

What is a letter of wishes?

It is a letter, written in plain English, which sets out your wishes for the distribution of your estate on death.  It is a non-binding letter designed to complement your will.

The purpose of a letter of wishes is to guide to executors, trustees and family members and provides an opportunity to set out your thought process either at the time of making the will or at a later date.

In many cases, a letter of wishes will become the most important tool in assisting your executors and trustees in reaching pragmatic early decisions in line with your specific wishes – speaking out where a will cannot.  A letter of wishes can be key on assisting your executors to manage family expectations, wealth, the family business, and general family dynamics for many years.

Importantly, and unlike a will, it is a private document. Following a death and where an application for probate/confirmation from the court is being sought in connection with a deceased person’s estate, the will becomes a publically registered document but a letter of wishes does not.

Should you make one?

A letter of wishes can be particularly helpful in a number of situations; including giving you the opportunity to explain, in your words, why certain assets are being left to one child and not another or why certain family members have not been included as beneficiaries, or why unexpected benefi­ciaries have been included in your will.

Your family situation may not be straightforward – it could include remarriage, children from different relationships, a mix of very young and adult children, a child involved and another not involved with the family business, meaning your will might not provide for family members as they might expect.  Don’t make the mistake of assuming that what you think is what they expect.  More often, it’s not.  And don’t make the mistake of assuming that it won’t matter after your gone.  It does to your heirs and your legacy lives on through them.

A letter of wishes can be also used in many circumstances. The most common is to determine who should inherit personal belongings, such as jewelry and furniture and artwork.  While these may or may not have material monetary value, they often are the cause of unanticipated, and potentially unresolvable problems among your heirs long after you die.  Most often, an item or issue with strong emotional value (rather than monetary value) is the key to either disrupting or preserving family harmony.

Naming personal items in a will is also cumbersome and generally not done and so a letter of wishes may serve this purpose.  You can even name a trusted person in your will to receive all of the items with a wish that they then distribute all of your personal items in accordance with your letter of wishes.  The letter of wishes is then stored with the will.  Alternatively, you can name more than one person to lessen the chance of no-one being alive to carry out your letter of wishes.

Beyond personal belongings, a letter of wishes can deal with complex and/or unusual assets (including how to look after a pet), business interests, tax mitigation and the interaction of these assets within a trust arrangement. They can also be used to explain the rationale for certain gifts made during your life s to certain children or even funeral instructions.  Guidance can also be given for care of vulnerable children or guardians of your children in relation to religious upbringing, educa­tion and residence, etc.

If your circumstances change?

It is just as easy to make a letter of wishes, as it is to destroy or update one, without the need to update your will.  Its flexibility and confidentiality means it can evolve in tandem with your life.  Crucially, it allows you to let those key people know your true (and current) wishes and thoughts which are not always evident from a will.

A simple letter of wishes lets you explain your thoughts and intentions.  Without it, your family could be left hurt and frustrated, and even unable to grieve, not knowing the reasons for receiving a smaller inheritance in comparison to their siblings or even being left out altogether.

Just having an explanation from a parent, rather than living with uncertainty, may be enough mend sibling rivalries and preserve family harmony for decades.  In this way, a letter of wishes itself can be tremendously valuable.

The foregoing content reflects the opinions of Advisors Capital Management, LLC and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.


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