Letter of wishes
A letter of wishes is a written statement, usually not legally binding, in which the creator of a trust or a will explains to trustees or executors how they hope their discretion will be used.
A legal document such as a trust deed or a will often gives trustees or executors room to use their judgement. A letter of wishes is how the person who wrote that document tells them what they hope that judgement will look like. It might explain why certain beneficiaries are treated differently, what the family business means to the writer, or how they would like shares to be handled if a successor is not yet ready.
In general, a letter of wishes is not legally binding. Trustees may take it into account, but they keep their own fiduciary duties and their discretion. The term is used more widely in some countries than others, and in the US similar documents are sometimes called by other names.
Founders who place shares in a trust often use a letter of wishes to pass on context that does not belong in the formal document: the values behind the business, hopes about stewardship, or thoughts on how the next generation should be prepared. It can be updated more easily than the trust itself, as circumstances change.
A common confusion
A letter of wishes is sometimes mistaken for a family-wide document such as a family constitution, or for an agreement between founder and successor such as a Handover Charter. It is neither. It is written by one person, addressed to the trustees or executors, and the people it most concerns may never read it.
Why it matters
Writing down intentions is useful. Telling them to the successor in person is a different thing, and often more useful while the founder is still in the business. The article on the founder’s legacy without the shadow looks at how founders can pass on what matters without holding the next generation back.
This is a general definition only. The family should involve its lawyer in preparing a letter of wishes alongside any trust or will.