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Archive / Investment Adviser (Level 2) / Basics of Estate Planning
nism-series-xb-letter-of-wishes-discretionary-family-trust[ INVESTMENT ADVISER (LEVEL 2) ]

What is the legal status and practical role of a 'Letter of Wishes' executed alongside a Discretionary Family Trust deed?

[ A ]A formal criminal warrant signed by the High Court.
[ B ]A 100% legally enforceable contract that overrides the trust deed.
[ C ]A non-legally-binding guidance document written by the Settlor expressing personal intentions, family values, and distribution preferences to guide the Trustees when exercising their discretionary powers.[ CORRECT ]
[ D ]A commercial invoice demanding payment from beneficiaries.
Takeaway

The correct answer is C: a Letter of Wishes is a non-binding guidance document from the settlor to the trustees, expressing personal intentions on distributions without overriding the legally governing trust deed.

Derivation
A discretionary trust deliberately gives trustees wide discretion over how and when income or corpus is distributed among beneficiaries, so that the arrangement can adapt to changing family circumstances over decades. Because the deed itself stays silent on specifics, settlors typically write a separate, informal Letter of Wishes recording their intent -- who should get more, under what conditions, family values to weigh -- as moral guidance the trustees consider but are not legally bound to follow. Its non-binding nature is deliberate: making it enforceable would collapse the discretionary flexibility that gives the trust its tax and asset-protection advantages, so this distinction is a favourite exam trap.
Why the others fail
A — A formal criminal warrant signed by the High Court.
Wildly incorrect; a Letter of Wishes is an informal private document, not a criminal warrant issued by any court.
B — A 100% legally enforceable contract that overrides the trust deed.
Reverses the legal hierarchy: the trust deed governs, and the Letter of Wishes is explicitly non-binding guidance, not an overriding contract.
D — A commercial invoice demanding payment from beneficiaries.
Fundamentally mischaracterizes the document's purpose; it conveys the settlor's wishes to trustees, it is not a demand for payment.