What is a “memorandum of wishes”?
A memorandum of wishes is often signed in conjunction with a trust deed. What is it?
Most family trusts that we see are “discretionary” trusts.
This means that the trustees have the discretion to decide who gets a benefit under the trust.
There may be quite an extensive range of beneficiaries ranging from the people who set it up, to their children, grandchildren, and other family members.
Sometimes they even extend to future spouses and to spouses and partners of children and grandchildren.
Simply because you are named as one of these possible beneficiaries, does not mean that you are entitled to receive anything. That discretion to decide who gets what is usually given to the trustees.
When you read a trust deed you will often see that the discretion is very wide. Trustees can often give part or all of the trust fund to one or several beneficiaries. They don’t have to give reasons. They have the “discretion”.
Often when people are setting up trusts they want to give the trustees some guidance as to how they would like to see those discretions exercised. This guidance is usually contained in an informal document often called a “memorandum of wishes” or a “letter of wishes”.
This memorandum or letter is not legally binding on the trustees. However usually the person setting up the trust is careful to choose trustees who they think will exercise the discretion in an appropriate way and usually they are expecting the trustees to pay some respect to a memorandum of wishes.
These documents are often employed in anticipation of there being a change of trustees. For example, if someone sets up a trust they may be able to indicate in their will who will take over as trustees on their death. A memorandum of wishes can be useful in guiding any replacement trustees.
A memorandum of wishes is confidential to the trustees. It is not a document that they can be obliged to show to the beneficiaries. It is to help them in making their decisions as to how they exercise their discretion and is therefore part of the trustees’ internal decision-making process.
Wills and Estates
Your will contains instructions about what you want done with your property when you die and how you want your dependants to be looked after. It may be the most important piece of paper you’ll ever sign.