A Letter of Wishes - the pros and cons
What is a Letter of Wishes? The pros and cons
When you make a Will, you’ll probably come across the term Letter (or Memorandum) of Wishes. Sometimes it’s even referred to as a Side Letter. So - what are these documents? Are they useful? Why don’t we just express our wishes in a single legally-binding Will? Let’s explore these questions and see how useful a Letter of Wishes can be.
A non-legally binding expression of wishes
So - let’s begin with a definition. A Letter of Wishes is a confidential document which is written, not to replace a Will, but to supplement it. The contents of an actual Will are legally binding. But - the contents of a Letter of Wishes are not, although it can still be a most useful document.
The contents of your Will relate to the big picture - your estate. A Will describes your wishes for the disposal of any property, shares or savings that you own. It might also include ‘big ticket’ or high-value possessions.
Your Letter of Wishes comes into play when you come to decide how you’d like to pass on smaller, individual possessions. Who, amongst your relatives or friends, for example, will inherit items of jewellery, ornaments or pieces of furniture?
Why not list the smaller possessions in the Will?
Regardless of their monetary value, you may well wish to list these belongings separately, perhaps because of the sentimental value they hold for you and the recipient. Why can’t these items be simply listed in the Will? Well, they could be but to do so would prove to be a lengthy, possibly cumbersome process and, therefore possible costly.
Consider also what would happen should you wish to add, amend or delete an item from the list? Suppose an intended recipient dies before you or there’s a falling-out and you no longer wish them to be a beneficiary? Again, if the items are listed in your main Will, making amendments, however small, could be expensive.
Let’s look at one example of the benefit of listing items in a Letter of Wishes - say you were to leave a treasured possession, such as a Gucci watch in your Will, to a favourite nephew. When it comes to the reading of your Will and the distribution of your estate, it’s discovered that the Gucci watch is lost. The onus would then be on the Executors to source a suitable replacement and pay for it out of their own pockets. Not so - if the watch was listed on a Letter of Wishes.
How to set up a Letter of Wishes
One option is to choose a trusted individual and name them in the Will as the person to distribute the specific belongings according to your separate Letter of Wishes. The letter is then stored with the Will. This way, if at any point, you have a change of heart about who should inherit what, you can make changes without changing the Will itself and thereby incurring extra fees.
Not legally binding
However, there can be drawbacks to this option.
- The person named to receive the items doesn’t have to, by law, distribute them according to your wishes in the letter. The contents of the Letter of Wishes could, in theory, be viewed as nothing more than your wishes. There’s nothing to stop the named individual from keeping the items for themselves.
- The person you name to receive and distribute the items might die before you or not have the necessary capacity to carry out the wishes.
- A Letter of Wishes can’t be physically attached to your Will. So, there’s always the possibility that the letter could be separated from the Will or even lost.
A way to solve issues one and two is to name more than one trusted individual to receive the items. This reduces the chance of no-one being alive or capable of carrying out the wishes. Or, you could name the Executors and Trustees (“Trustees”) already appointed in the Will to accept the items.
However, this latter solution also carries a risk. Those named in the Will to inherit the bulk of your estate (“residuary beneficiaries”) could claim these items as belonging to them and not those named in the letter. This is because the Trustees are under no legal obligation to follow the letter of wishes, even though they do have to answer to the residuary beneficiaries.
To avoid this, you could name Trustees to receive the items personally and not in their professional capacity. However, this takes us back to the first potential issue -namely, that the Trustees could keep the items for themselves.
So, there you have the essential pros and cons of using a Letter of Wishes. For the reasons we’ve discussed, it’s best not to list high-value items in such a Letter. Safer to restrict the Letter to everyday possessions of no significant value. In this way, there’s every chance that your possessions will finish up with the relatives and friends who you feel will most appreciate them.
But of course, your best option is to consult an expert - a specialist who can advise you how to give yourself the best chance of distributing your estate and possessions to those you wish to receive them. For exactly that kind of specialist advice
Contact Tim Mullock on 01234 713021.
Or email Tim.Mullock@AdeptAssetSolutions.co.uk