Letters of Wishes

The letter of wishes: a bridge between settlor and trustee

The letter of wishes is a confidential document in which the settlor expresses their wishes, values and guidance to the trustee concerning the management and distribution of trust assets. Although it is not legally binding — and this is intentionally so — it is a fundamental tool in the practice of discretionary trusts.

For the trustee, the letter of wishes represents an invaluable source of information about the settlor's intentions. It illuminates the family context, values and priorities that motivated the creation of the trust, and provides practical guidance for the exercise of discretionary powers. A professional trustee will always give considerable weight to the wishes expressed by the settlor, even while retaining the independent obligation to protect the interests of the beneficiaries as a whole.

Contents of a letter of wishes

The letter of wishes can address a wide range of subjects. The most commonly covered themes include:

• Distributions to beneficiaries: Wishes regarding the timing, amount and conditions of distributions to each beneficiary. For example: distributions for education, purchase of a first home or starting a business.
• Priority among beneficiaries: Indication of which beneficiaries to favour in certain circumstances, or prioritisation of needs to be met first.
• Investment strategy: Preferences regarding investment approach, risk tolerance, sectors to favour or avoid, ethical or sustainability considerations.
• Education and values: Wishes regarding the education of children and grandchildren, family values to transmit, the importance of work and financial independence.
• Particular circumstances: Instructions in the event of a beneficiary's divorce, dependency, financial difficulties or any other event affecting a beneficiary.
• Philanthropy: Wishes regarding charitable giving, support for specific causes or the establishment of foundations.
• Governance: Preferences concerning the protector's role, family consultations and decision-making mechanisms within the trust.

Drafting and updating

Drafting an effective letter of wishes requires a delicate balance between precision and flexibility. It must be sufficiently detailed to guide the trustee in its decisions, while avoiding being so prescriptive that it could be interpreted as a binding instruction — which would undermine the discretionary character of the trust and could have adverse tax consequences.

Our team assists settlors in drafting structured and balanced letters of wishes. We conduct in-depth consultations to understand the settlor's values, priorities and concerns, then prepare a clear and comprehensive document that the settlor can review, comment upon and sign.

It is recommended to review the letter of wishes periodically — typically every two to three years — or upon significant events (birth, marriage, divorce, death, change of a beneficiary's domicile). The settlor can amend, supplement or replace their letter of wishes at any time during their lifetime, making it a living and adaptable tool.

Confidentiality of the letter of wishes

The letter of wishes is a strictly confidential document between the settlor and the trustee. Courts in several jurisdictions have confirmed that the trustee is generally not required to disclose the letter of wishes to beneficiaries, even if they request it. This confidentiality allows the settlor to express their wishes freely, including preferences that might be perceived negatively by certain beneficiaries. Swiss Trustee retains letters of wishes in its secure archives, with the strictest confidentiality measures in place.