Letter of Wishes UK (2026): What It Is, When to Use One, and How Trustees Must Treat It

A letter of wishes (also called a memorandum of wishes or letter of guidance) is a PRIVATE, NON-BINDING document written by a settlor (the person who created the trust) or testator to provide guidance to the trustees of a discretionary trust about how to exercise their powers. It is separate from the trust deed and from the will: (1) WHAT IT DOES: (a) Identifies which beneficiaries the settlor intended to benefit most and in what order; (b) Explains the circumstances in which distributions should be made (e.g. education; house purchase; retirement; medical need); (c) Gives guidance on investment approach (e.g. ethical investing; risk tolerance); (d) Provides background on family dynamics that might not be appropriate to include in a formal legal document; (e) Records the settlor's wishes for the long-term management of the trust fund; (f) For a testamentary trust in a will: supplements the will by giving the named trustees more nuanced guidance than the will itself can contain; (2) IS IT LEGALLY BINDING: NO — a letter of wishes is NOT legally binding on the trustees. The trustees are not compelled to follow it; (3) BUT — TRUSTEES MUST READ AND CONSIDER IT: although not binding, the letter of wishes is a MATERIAL DOCUMENT that trustees MUST take into account when exercising their discretionary powers. A trustee who does not even read it — or who ignores it entirely without reason — may be in breach of their fiduciary duty. The key case is Re Londonderry's Settlement [1965] Ch 918: trustees are not required to give their reasons for a decision, and beneficiaries cannot compel disclosure of the letter of wishes (in all circumstances), but trustees must act honestly and in good faith in the interests of all beneficiaries; (4) WHY NOT BINDING: the settlor deliberately chose to use a trust with trustee discretion, rather than a fixed trust or a direct gift. The trustees must be free to exercise genuine discretion — they cannot simply rubber-stamp whatever the letter says. If they are bound by the letter, it may not be a valid discretionary trust at all (a sham trust); (5) INTERACTION WITH THE TRUST DEED: the trust deed CANNOT be varied by a letter of wishes. Where the deed and the letter conflict, the deed prevails. The letter can only operate WITHIN the parameters set by the deed (e.g. if the deed restricts distributions to a list of named beneficiaries, the letter cannot add new beneficiaries).

A well-drafted letter of wishes gives the trustees a clear, practical picture of the settlor's intentions without creating legal obligations that would undermine the trust's validity or the trustees' discretion: (1) IDENTIFY THE TRUST: date and name of the trust; full names of trustees; short description of the trust fund. This ensures the letter can be matched to the correct trust without ambiguity; (2) NAME THE INTENDED PRINCIPAL BENEFICIARIES: if some beneficiaries are more favoured than others, say so — e.g. 'I would wish the trustees to prioritise the needs of my spouse [name] during her lifetime, and to consider my children's needs after her death'. Avoid creating a fixed order that reads as binding; (3) DESCRIBE THE CIRCUMSTANCES FOR DISTRIBUTION: education (school; university); house deposit; business start-up; medical emergencies; retirement; holidays. Give the trustees a framework — e.g. 'I would wish distributions to my children to be made for capital needs (house purchase; business); I would prefer the trustees not to make income distributions for day-to-day living expenses'; (4) ADDRESS VULNERABLE OR FINANCIALLY IRRESPONSIBLE BENEFICIARIES: if one beneficiary has a history of addiction, financial mismanagement, or is subject to means-tested benefits — say so. Explain why the trustees should exercise additional caution in their case; (5) ADDRESS FAMILY DYNAMICS: explain relationships and dynamics not apparent from the trust deed — e.g. 'My daughter [name] has not spoken to her brother [name] for 10 years — I would wish the trustees to treat each branch of the family independently'; (6) INVESTMENT GUIDANCE: desired approach — e.g. capital preservation; ethical/ESG investing; avoidance of specific sectors; preference for UK equities; (7) PROFESSIONAL ADVICE: state whether the trustees should continue with existing advisers or should take fresh advice at each decision point; (8) UPDATING INSTRUCTIONS: express that you intend to update the letter periodically and that the most recent dated letter supersedes all prior letters; (9) SIGNATURE AND DATE: sign and date the letter. Keep the original with the trust deed; provide a copy to the trustees; (10) AVOID BINDING LANGUAGE: do not use language like 'must', 'shall', 'the trustees are required to'. Use 'I would wish', 'I request', 'I hope', 'it is my desire'. Binding language risks making the trust a sham or creating secret trusts unintentionally.

The duty of trustees with respect to a letter of wishes sits at the intersection of the duty to act in good faith, the duty to consider all relevant matters, and the right to maintain discretion without giving reasons: (1) THE DUTY TO READ AND CONSIDER: trustees MUST read the letter of wishes when making a distribution or investment decision. A trustee who has not read the letter is not exercising genuine discretion — they may be in breach of their duty of care (TA 2000 s.1). The letter is a relevant consideration; failure to consider a relevant matter invalidates the exercise of a discretionary power; (2) RE LONDONDERRY'S SETTLEMENT [1965] Ch 918 — THE KEY AUTHORITY: the Court of Appeal held that: (a) Beneficiaries are generally NOT entitled to demand disclosure of the letter of wishes or see the trustees' reasons for decisions; (b) However, accounts and information about trust assets must be provided on request; (c) The critical boundary: information = yes (trust accounts; asset values; what the trustees did); reasons for discretionary decisions = no (why the trustees preferred one beneficiary over another; the content of the letter of wishes). Note: this remains the general rule, though some more recent cases suggest courts may order disclosure in limited circumstances; (3) SCHMIDT v ROSEWOOD TRUST [2003] UKPC 26: the Privy Council extended the court's jurisdiction to supervise trustees' discretion — a beneficiary (or potential beneficiary under a discretionary trust) has a right to seek the court's intervention where there is evidence of impropriety. The court can order disclosure of trust documents (including the letter) in appropriate cases. The test is whether it is appropriate in all the circumstances; (4) DUTY NOT TO FETTER DISCRETION: trustees cannot treat the letter as absolutely binding. Where a trustee has fettered their discretion by deciding in advance always to follow the letter, any distribution made is void as an improper exercise of discretion (Breadner v Granville-Grossman [2001]); (5) DUTY TO ACT IMPARTIALLY: even if the letter favours one beneficiary, the trustees must still consider the interests of ALL beneficiaries (including remaindermen) — a unilateral distribution on the letter's instruction without regard to the whole class is a breach.

An EXPRESSION OF WISHES (sometimes called a nomination of beneficiaries) is the pension equivalent of a letter of wishes — but it operates differently and is significantly more important in practice: (1) WHAT IT IS: an expression of wishes is a form completed by a pension scheme member instructing the pension trustees who should receive the death benefits (lump sum and/or pension) on the member's death. It is typically a form provided by the pension scheme; (2) IS IT LEGALLY BINDING: like a trust letter of wishes, an expression of wishes is NOT legally binding on pension trustees. The pension trustees retain full discretion to pay to whoever they determine is appropriate in the circumstances. However, most pension trustees follow the expression of wishes in the absence of unusual circumstances; (3) WHY THIS IS SIGNIFICANT — IHT: pension death benefits (lump sums) paid at the pension trustees' discretion are typically OUTSIDE the deceased's estate for IHT purposes. They are not subject to the 40% IHT charge because the member never owned the benefit — it belonged to the pension scheme. If the member had a nominated beneficiary as a fixed entitlement, the benefit could fall into the estate. Pension death benefits paid under the trustees' discretion remain outside the estate (though note: the Finance Act 2024 proposed changes to include pension death benefits in the IHT estate from 2027 — seek specialist advice on the current position); (4) KEEP IT UP TO DATE: this is critical. If an expression of wishes has not been updated since a divorce; remarriage; birth of a child; or other significant life event — the pension trustees may pay to an ex-spouse or a person the member no longer wishes to benefit. Pension trustees must consider an out-of-date expression but may depart from it if circumstances have clearly changed; (5) CONTRAST WITH WILL: a will CANNOT direct pension death benefits — the member's estate has no claim over discretionary pension benefits. The will and the expression of wishes operate independently; (6) DIFFERENCE FROM A TRUST LETTER OF WISHES: (a) Trust letter of wishes = guidance to trustees of a settlement (lifetime or testamentary); (b) Pension expression of wishes = guidance to pension trustees about death benefits; (c) Both are non-binding; both must be considered; both are critical to keep current.

A letter of wishes should be treated as a living document — updated when circumstances change — and it remains private in most cases: (1) WHEN TO UPDATE: (a) On any change in family circumstances: marriage; divorce; civil partnership; new child; grandchild; death of a beneficiary or trustee; (b) If a beneficiary's circumstances change significantly: addiction; financial difficulty; bankruptcy; marriage to someone the settlor disapproves of; disability; (c) If the trust fund value has changed dramatically (increased or decreased) — the proportions previously envisaged may no longer make sense; (d) If the settlor's own views and priorities have changed; (e) As a minimum: review and re-sign every 3-5 years to confirm the wishes remain current; (2) HOW TO UPDATE: write a new letter, sign and date it, and state that it supersedes all previous letters of wishes for that trust. Provide a copy to the trustees. Retain the original with the trust deed. No legal formality is required — unlike a codicil to a will, a letter of wishes does not need witnesses or notarisation; (3) CAN BENEFICIARIES SEE IT: generally NO — Re Londonderry establishes that beneficiaries are not automatically entitled to see the letter. Trustees may choose to share it with beneficiaries (or with the trustee beneficiary's legal advisers) in the interests of transparency, but they are not obliged to. Where a letter reveals sensitive family information, trustees will typically not disclose it; (4) IS IT PART OF THE WILL — PROBATE: NO — a letter of wishes addressed to trustees is NOT part of the will and is NOT filed at the Probate Registry. It is a private document. It does not become a public record; (5) DOES HMRC SEE IT: HMRC is not routinely provided with a letter of wishes. It is not relevant to the calculation of IHT on the estate (the trust assets are outside the estate or subject to IHT separately on the 10-year charge). However, if HMRC investigates the IHT position of a discretionary trust, it may request trust documents including the letter; (6) IS IT SAFE FROM CREDITORS: a letter of wishes held by the trustees is a trust document — it belongs to the trust, not to the settlor. Creditors of the settlor cannot seize it.