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Stacey Bothwell looks into what can be done by Parents and business owners to establish a letter of wishes, designating Trustees and beneficiaries upon unexpected death.I recently had the opportunity to draft a letter of wishes in the context of the reorganization of a corporate group and establishment of a family trust and wills. In this situation the children of the owners of the corporation and the owners themselves were fairly young.  The children were not all married and some were still in career flux.  Some of the children worked in the family business and some appeared to show no interest whatsoever in being a part of the family business. As expected, the family trust that was established was fully discretionary in the hands of the trustees who at the time of the establishment of the trust were the parents. 

The parents were concerned with what would happen in the event that they both passed at the same time.  To the parents, it was important that the children who were currently involved with the business became the voting and controlling shareholders of the family business corporation. However, once they were gone how was that wish, among other plans, to be known?

In anticipation of such a catastrophic event, a letter of wishes was drafted. A letter of wishes is an absolutely non-binding document and it can never fetter the discretion of the trustees of the trust. However, it is a letter from the settlor that sets out why the trust was established and what it was intended to accomplish. It is an informal document whose sole purpose is to educate those that come after the original trustees as to what the intent was for the property of the trust. This can be very important in a family business where there are children who are involved in the day-to-day operations of the business and should become the ones who control the business and where the other children should share in the wealth created by the business but not all of the sudden find themselves as decision-makers in a company they likely know very little about.

A letter of wishes can put in writing how the parents envisioned the distribution of the trust property, including the distribution of the voting shares of the family corporation, for instance.  It can be helpful to the trustees, who may have had little to do with the initial estate planning, ensure that the trust property is distributed as planned.  A letter of wishes can be amended as situations change and this may be necessary especially when dealing with younger families whose situations can change on a yearly basis.

If you have any questions about business succession planning or any other topic, please contact Stacey Bothwell at [email protected] or call 519-672-2121.

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