What is a letter of wishes, and is it right for me?
A letter of wishes (LOW) is a side letter that accompanies your estate plan. The LOW is not designed to override your estate plan but rather to demonstrate your perspective to your agents and/or heirs. Effectively, this is your opportunity to communicate your desires in your own words while recognizing that this document is not binding.
What should I include in my LOW?
A letter of wishes is a highly personal document and is unique to each person. Some people choose to direct the letter to their children and outline their beliefs about how they would like them to utilize their inheritance. Others may outline their charitable desires and specify what causes they are passionate about. You can also direct your letter to your executor or trustee and outline how you hope they would behave when acting on your behalf. Many take the opportunity to share their family mission statement, which outlines the principles that you believe in.
Unlike a will or a trust, your agent is not required to share an LOW with your beneficiaries. The LOW may contain sensitive information that is pertinent to the agent, but perhaps you do not wish your heirs to be aware of it. You can also provide suggestions to your trustee about when and how you would recommend they make distributions. While the trustee is bound by the trust document, the LOW can provide helpful guidance for the administration of your trust.
What format should my LOW take?
There is no set format to a LOW. Many clients choose to type up a letter that is written less formally so that it conveys their “voice.” Others elect a more formal document that is addressed to their agent, which may or may not be shared with the family depending on the client’s preference. Others choose to record a video and have a conversation with their family. The ultimate decision is yours, there is no incorrect answer.
When would I share the LOW with my trustee and not my family?
There are times when a family may have a sensitive situation that they would like to address privately with their trustee but not more broadly within the family. For example, if a family member has a substance abuse problem, it is important for the trustee to be aware of the situation as they need to factor that information in when making decisions regarding distributions. Perhaps you have concerns about one of your children’s spouses. This is information that is pertinent to your trustee so that they can help protect your family, but the family doesn’t necessarily need to be aware of your feelings on a given subject.
How often should I update my LOW?
This is a personal preference that is dependent on you and your circumstances. Some clients review their LOW once a year, around the holidays, ensuring that the document still effectively expresses their situation. Others may choose to review their LOW only when there is a major life event, e.g., retirement, birth of a grandchild, passing of a loved one, etc. Many advisors recommend that you review your LOW upon the occurrence of a life event or approximately every three years. If and when you do update your LOW, make sure to provide a copy to your agent and advise them that this version overrides the previous document.
What if I want to share my LOW with my children during my life?
Some clients have elected to hold family meetings to review their estate plan with their families. Often, one of their advisors (tax advisor, estate planning attorney, representative of the family office) helps to organize and lead the meeting, so they are available to answer technical questions, with the approval of the client. You may elect to share your LOW during a family meeting. Some clients provide copies of the letter to their family, while others choose to read it aloud or have their advisor do so. This tends to be a moving and emotional experience, which may or may not be the right fit for every family. Keep in mind that if you do share your LOW during your life, you should provide your heirs with new copies each time you update the document.
Conclusion
Regardless of the format, whether it is a LOW, family meeting, or just stories, it is important for your family to understand the legacy that you are leaving for them. How you choose to demonstrate and share that legacy is up to you but know that you have plenty of options to find the format that is right for your family.
If you have questions or need assistance, please contact a professional at Forvis Mazars.