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Sunday, May 8, 2011

Memo to Trustees supplements your will with personal instructions

After you pass away, your will is going to be read by your family members, and possibly by others such as a lawyer, judge, probate clerk, land registry clerk and accountant. There really isn't much privacy for such a private document. But what if there are words you want to leave behind that you don't want exposed to all those sets of eyes?

For example, say you've used your will to set up a trust for one of your children to age 30 but not for the other children. The will doesn't say why you've done that, nor should it. There is no need to embarrass or upset the child by laying out for all to see what you perceive to be his failings or weaknesses.Is there a way of explaining things just to those who need to know?

As another example, what if you are leaving your young or teenaged children a large legacy but are concerned that they won't know how to handle the money once they get it? Wouldn't it be great if you could give some detailed, private instructions and instructions to the trustees of the money about what you think your kids need?

There's nothing stopping anyone from writing a personal letter to a family member to be read once the writer has passed away. In this case though, I'm talking about instructions or explanations for your executor or trustee that are specifically focused on looking after your family and your estate.

Most wills contain the bare bones of the testator's wishes. I have always liked to put a little more information in wills to explain anything unusual, but not all lawyers do that by any means. This results in executors and trustees being asked to set up and administer trusts without much guidance. The legalities are simple enough: set up a trust with a certain amount of money for a certain person and pay it out at a pre-determined time. I'm suggesting that you can provide much more detailed guidance that would be helpful on a day-to-day basis.

This is done in the form of a document called a Memorandum to Trustees. This document is sometimes done at the same time as your will, and sometimes later, but in either event is kept with your will. It doesn't form part of your will, so when you pass away, even if the will is sent to the court for probate, the Memorandum is not. It is seen only by the executor or trustee.

The document is not legally binding. Think of this as a letter to the person you've named as your executor or trustee giving the background for the decisions you made in your wil, and giving suggestions on how you think things should be done.

Most trusts for children or spouses give the trustee a discretion as to how much money the children or spouse should receive. That is important from a legal point of view, but think about what that's actually like for the trustee on a day-to-day basis. Which requests for money does he grant and which does he turn down? What are the long-term goals he is trying to achieve, beyond safeguarding the money?

One of the topics I've seen covered in this type of Memorandum is a parent's wish that the children be educated as to how to handle money.  In other words, a parent who lived would have made this a priority for his children, and if he passes away, he wants his representative to make it a priority too. The Memorandum can express a general wish or instruction, or it can be as detailed as giving the name of a financial advisor the parents like.

Many parents use the Memorandum to reinforce their desire that their estates be used to fund their children's education. They talk about everything right down to whether or not the trustee should buy the children a car to travel to school.

In another Memorandum I dealt with not long ago, a husband explained that he had not named his wife as executor because she had asked him not to, and that his decision to appoint someone else had nothing to do with not trusting her or thinking her incapable of handling it. His Memorandum to the executor directed the executor to let his wife do as she pleased with the money.

There is no required form for a Memorandum like this. They may be typed or handwritten. They don't need witnesses, as they are not legal documents. They can be one paragraph or several pages. Their importance lies in the fact that you as a parent or spouse get to supplement your will in a personal way.


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  2. Thanks for your feedback. I try to keep my topics and my posts as realistic and practical as possible, and base them on the questions I hear every day at work. Thanks for reading!



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