Precatory Words or Direction?

“ I should emphasize that I am in no way limiting your discretion or in anyway creating any binding trusts or obligation upon you but merely making you aware of how I would prefer the Trust Fund to be dealt with subject to the powers and discretion conferred upon you under the Trust “.

Can the precatory words above provide protection or is it actually a direction which could determine the mind and management of  a trust? (“Garron” decision April 12 2012)

If a trustee is inclined to follow a Letters of Wishes (LOW), its imperative that the decision making process is documented to illustrate that discretion was exercised. If not, is it possible that the LOW can be construed as a direction?

LOWs are most often more definitive than the trust instrument. Whilst the trust is considered a core document that contains the terms and conditions of the fiduciary relationship, the LOW is non binding and will usually contain the specifics of the settlor’s intent.  This means that in most cases, trustees rarely disclose the LOW unless requested by the settlor. (Londonderry’s Settlement).

Trust practitioners recommend the use of notes as a means to document the intent of the settlor. A well written memorandum marked “without prejudice”  will not only capture the settlor’s intent but also ensure that his wishes are kept completely private and confidential.

Do you have a reason to question whether your trust is discretionary or directed?  Perhaps your trust is discretionary but your LOW is not. Does your LOW provide sufficient information to assist the trustee without crossing the proverbial line of no return.