Statements of Wishes, or what is sometimes called a Letter of Wishes, have long been used in international trusts and off-shore planning. Historically they derived from Testamentary Trusts. For decades, we have used them with inter vivos trusts or living trusts and irrevocable dynasty trusts. They are also a valuable tool in certain kinds of charitable planning. Statements of Wishes are not clear directives. Rather, they are precatory words or instructions that express a non-binding wish, hope or desire. They can provide guidance to a Trustee in the exercise of discretion.
There are a variety of ways in which they can be written. We provide our clients with a Statement of Wishes Workbook to aid in the process. The mechanics of writing are helpful, but it is more important to understand why Statements of Wishes are the most critical part of your estate plan. When you know the why, the how is no longer a problem.
A Greater Purpose. All of us want wealth to one degree or another. Few of us actually get as much as we would like. Among those who manage to acquire some measure of wealth, not all are able to keep it. Among those who successfully keep their wealth while living, once they are done with it, very few still are able to pass it to their children without losing a big chunk to taxes and attorneys fees. In that small group of people who manage to transfer their fortune intact to their children, a tragically small minority are able to do so without the money causing great harm to their offspring. Here is the big question. If we run the gauntlet and avoid all the obstacles to acquiring and keeping and transferring wealth to our children, only to have it destroy their lives, what good have we done?
No amount of estate planning or tax planning or asset protection will be of any permanent benefit if we fail to make the money we leave our children a blessing rather than a curse.
The Meaning. The reason for your Statements of Wishes is to accomplish the big purpose. This is the most important element of your estate plan. This is where you determine what your estate will do to the Beneficiaries of your Trust. Wealth without purpose, is meaningless and destructive. Listing out your wishes attaches meaning to the money you leave behind. The greater the meaning attached to wealth, the greater the good it will accomplish in the lives of those who are touched by it. We are but temporary custodians of this world’s goods. We will all depart this mortality, but the legacy of our stewardship will outlive us and affect generations to come. Your Statements of Wishes will create incentives for your Beneficiaries to enhance their life and lifestyle and to improve themselves personally.
Wealth without meaning is a destructive force.
Wealth with meaning is a creative force.
The Purpose. Statements of Wishes guide Trustees in the exercise of discretion. They may have a variety of purposes and functions. For example, a Statement of Wishes may be a policy statement such as an investment policy or a simple statement such as “I have always found it beneficial (or harmful) to invest in _________”. Such a statement does not tie a Trustee’s hands, but gives the Trustee guidance in formulating an investment policy. Statements of Wishes may also be a value statement such as “education is important.” A value statement can be turned into an incentive statement by saying, “because education is important to me, if a Beneficiary graduates from University, the Trustee may provide them with a car.” You may come up with Statements of Wishes that go beyond policy, values or incentives.
Your Own Words. You can and should express your own Statements of Wishes in your own words. Your descendants and Beneficiaries will treasure your words more than whatever wealth you provide for them. To help you think through this and come up with your own ideas, we have put together a Statement of Wishes Workbook of ideas gathered from clients over the years. This Workbook is a tool for you to use in expressing your own ideas. It is not intended as a substitute for your personal thought and expression.
The Task. The Workbook suggests many tasks that you may recommend for your Beneficiaries to do. One dictionary defines a task as “a definite piece of work to be done,” and “a matter of considerable difficulty.” Some of the tasks may sound funny or strange. Some may sound too difficult or too easy. Some may even sound idealistic and impractical. However, the purpose of the list is to provide you with a broad range of ideas to trigger your own creative thoughts. You may find yourself thinking, “I would be a better person if someone would have motivated me to do that.” There are blanks in the form so that sa you have your own creative ideas, you may add them to the list.
Reasons For Recommended Tasks. As you identify tasks that you want the Beneficiaries to accomplish, it will help a great deal if you make notes as to why you value that particular task. For example, you may indicated that the task “demonstrates high moral standards”, or “will develop character”, or “will build confidence”, or “will help you maintain your health”, or “I wish I would have done that when I was younger (I’m still young, you know)”, and so forth. The “why” is a big part of what gives the Statements of Wishes so much power in influencing future generations for good.
Procedure. You may establish your own procedures for recognizing the accomplishment and completion of objectives and tasks. In the absence of written instructions from you, we recommend this approach. Periodically, the Trustee will meet with the Beneficiary to help the Beneficiary adopt or select recommended tasks (from the list of those identified by you). Then the Trustee can coach or counsel with the Beneficiary to set goals or objectives to accomplish the tasks. The Trustee may help the Beneficiary consider appropriate ways to provide evidence to verify accomplishments. The Beneficiary and Trustee will meet periodically (at least once a year) to review the Beneficiary’s objectives, progress and accomplishments. The Beneficiary will provide evidence to verify progress and accomplishments. The Trustee determines if the objectives have been met or the task has been accomplished. If so, the Trustee may apply benefits from the Trust to the Beneficiary in keeping with your wishes.
Evidence of Accomplishments. The best goals are objectively measurable. All tasks require some kind of evidence to verify the achievement of the Beneficiary. It is up to the Trustee and the Beneficiary to work out what is acceptable as a measure or evidence of accomplishing the goal. It will be helpful if the evidence of accomplishing goals and objectives is kept in an Achievement Notebook. The notebook may be purchased by the Trustee using Trust funds, and may be updated from time to time by the Beneficiary. The Achievement Notebook may contain the documents, pictures, news articles, written and signed statements of third party witnesses, diaries, or other such items showing the achievements of the Beneficiary. The Trustee may contact third parties to verify the accomplishments of the Beneficiary. The Achievement Notebook will become a valuable artifact of family history.
Distributions of Benefits. The Trustee has discretion to allocate Trust benefits, over and above any other distributions which the Trustees make under the Trust, to Beneficiaries who successfully accomplish the Tasks you recommend. In keeping with your Statements of Wishes, the amount of the distribution from the Trust to each Beneficiary may be based on the good faith progress of each Beneficiary toward the goals or objectives set or the accomplishment of success in the tasks adopted. If the Beneficiary has made no progress or reached no goals or objectives, the Trustee has discretion to limit distributions to a Beneficiary. However, if the Beneficiary has made a good faith effort of has reached or exceeded the goals or objectives set, the Trustee has discretion to distribute income and principle as a bonus for the Beneficiary’s efforts or success.
Standards. Based on your Statements of Wishes, the benefit may be commensurate with the effort expended or success achieved. The Trustee may also provide benefits and resources to the Beneficiary for purchase of tools, equipment, or materials needed to pursue adopted tasks. In forming the reason for distributions from Trust funds, the Trustee may consider the goal set, the effort expended, the result achieved, and the honesty and integrity of the notebook and the Beneficiary as shown by the interview (i.e. if the Beneficiary almost attained the objective but provided exceptional evidence and an outstanding interview, the Trustee might compensate for the shortfall with the counterbalancing strengths). In keeping with your Statements of Wishes, the higher the standard achieved and evidenced by the Beneficiary the higher the distribution to the Beneficiary from the Trust principal and income.
Advisory Committee. The Trustee may obtain advisors to serve as an Advisory Committee to help the Trustee administer your Statements of Wishes. The Advisory Committee may help adopt tasks, may help set goals, may help suggest ways to evidence accomplishment, may help determine proper amounts for distribution to Beneficiaries, and may assist the Trustee in any other manner deemed necessary or helpful by the Trustee. The Trustee may also want help deciding on what kind of evidence to require from the Beneficiary to show achievement of the goal, or what accomplishment of a certain task is worth. Advisory Committee members might be school teacher, coaches, instructors, close friends, religious leaders, family members, or anyone else whose experience or relationship to the Beneficiary will assist the process. The Trustee has the final say over all decisions of the advisors.
Final Comments. You are encouraged to make final comments to Beneficiaries at the end of your Statements of Wishes. The comments may even take the form of a letter to be attached to the form which shares your philosophies, experiences, lessons learned, joys, and personal values. This gives you one last shot at a speech which the Beneficiary may listen to. Have fun. Live cleanly and honestly. Make money or value for your family. Provide a service to society. Involve yourself in worthwhile business endeavors. Your example will be the ultimate expression of your values and wishes concerning your Beneficiaries.
Share. If you have ideas for Statements of Wishes or experiences in using them that may be helpful to others, please share. Send them to us. We will include your ideas in future versions of the Statements of Wishes Workbook.