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Topic: Inheritance tax

letter of wishes to accompany a will
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Letter of wishes to accompany a will

Letter of wishes to accompany a will

Using a letter of wishes can remove uncertainty for those looking after your money and assets after you die.

Uncertainty

When you draft your will you generally express exactly how you want your estate to be divided up in terms of each individual’s share. For example “I leave the residue of my estate to my three children in equal amounts”. This is fine for the bulk of your assets, but what about your personal possessions? Uncertainty over how you would prefer these to be distributed could lead to arguments between your loved ones after your death. Another thing to think about is whether there is anyone you would not wish to benefit from your estate? Your will usually describes who is to benefit rather than who is not.

Trust

A discretionary trust is a powerful way of protecting your family wealth whilst ensuring your family and your descendants are provided for after you die. This type of trust makes the settled funds the legal property of the trustees you appoint. The trustees then manage the funds on behalf of the beneficiaries, and have the discretion to pay out income and capital as they see fit. Because the beneficiaries have no absolute right to the income or capital placed in a discretionary trust, conflicts can arise when it comes to extracting funds.

Directions

Fortunately, you can help to give your executors and/or trustees an idea of what you do or don’t want the funds used for by drafting a letter of wishes to go alongside your will. For example, you can use this to direct the trustees to the primary beneficiary, when funds can be appointed absolutely (if ever), and anything you don’t wish the funds to be used for. You can also use it to direct exactly who should receive any particular items.

Note that with a trust, whilst your trustees can use this as a benchmark, you must understand that they are not legally bound to follow it, and retain absolute power to manage the funds at their discretion.

Procedure

You simply draft the letter and keep it with your will. As an added bonus, you don’t need to use a solicitor to make any changes, which will save you fees compared with changing clauses in your will.

 

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