Leaving a Letter of Wishes for your Executor or Trustee
You are doing your estate planning and wish to set up a trust to look after your children until they are old enough to handle their own money, or to look after a spouse, before giving the capital to children from a previous relationship, or to provide for a disabled child for a lifetime.
Many wills and family trusts create trusts which leave a wide range of discretion for the trustee of the trust created. The discretion is important because it is hard to predict what will happen in the future with the lives of the beneficiaries or with changes to the tax system in Canada. You want your trustee to have as much flexibility as possible to deal with any contingencies which may arise.
You would also like to give your trustee some guidance on what you have in mind for how they make decisions about what to advance to beneficiaries and when. You definitely want them to advance for the education of your children, including post-secondary, but do you want them to help your child buy a car if they need it to get to school? Do you want them to advance money from the trust to help your child make a down payment on a house? Do you want the trustee to advance funds to a child to invest in a business? How about investing in an investment opportunity?
With a second spouse, where you want to preserve some of your estate for your children, if there is the right to encroach on capital, what do you see as circumstances where this would be appropriate? Obviously, the trustee can encroach for medical treatment or care, but what about travelling or buying a holiday home?
The further you get from the necessities of life, the more helpful guidance will be to your trustee. You can provide this guidance by preparing a letter of wishes for your trustee. This is a private instruction letter to your trustee, which is not available to your beneficiaries, so you can be as candid in your thoughts as you wish, without the fear of offending someone.
Your lawyer can give you guidance, based on the law and on his or her experience, to help you draft this letter of wishes. It can be done when you are creating the trust, or afterwards, upon reflection. Your trustee will be grateful for the guidance!