This blog post was written by: Mario Gravel, Estate and Trust Consultant, Scotiatrust Ottawa
Clients are increasingly raising concerns about beneficiaries who may be vulnerable to misinformation, undue influence, or online fraud. In trust planning, that raises a practical and uncomfortable question: how can a trustee exercise discretion responsibly when a beneficiary’s judgment may be compromised, while still balancing that beneficiary’s needs against the interests of others? This is not a new concern in substance, but its modern forms can be harder to predict. Online gambling is one example, where money intended as support can be lost quickly and with little trace. A parent or spouse may feel entirely confident that support is needed, while also feeling deeply uneasy about how easily funds might be diverted once they reach the beneficiary’s hands. A well-prepared letter of wishes will not eliminate the difficulty, but it can give trustees helpful context when they are later asked to make difficult calls.
From a trust administration perspective, these situations can be genuinely difficult. Many trusts waive the even-hand rule or permit significant discretion in favour of a life tenant, but settlors may still hesitate to authorize broad support where they worry that funds will be wasted, misdirected, or captured by someone exerting influence behind the scenes. Trustees are then left to navigate an uneasy middle ground: they must protect trust assets, support the beneficiary appropriately, and avoid an approach that feels punitive or unduly suspicious, often on imperfect information and while dealing with family members who see the same facts very differently. In some cases the concern resembles an ordinary spendthrift problem; in others the real issue is not poor judgment alone but the possibility of manipulation or exploitation.
This is also where the choice of trustee matters. A family member serving as trustee may be close to the very dynamics the settlor is worried about, and can find it hard to say no to a relative or to a person standing behind that relative. A corporate trustee sits at more of a distance. It is not part of the family system, it has experience holding firm on uncomfortable requests, and it is less exposed to the influence that may be at work in the background. That neutrality does not make the underlying questions easier, but it can leave the trustee better placed to weigh them and to provide structure, such as paying third parties directly or releasing funds in stages, where simply handing money to the beneficiary would carry real risk.
Why this is a trustee challenge
Trustees are not expected to distribute funds mechanically. They exercise judgment, make reasonable inquiries where needed, and administer the trust according to its terms and purposes. In sensitive family situations, a non-binding letter of wishes can be a useful complement to the trust terms. It cannot bind the trustee, but it can supply the examples, priorities, and context that make discretion less isolated and less reactive, and help preserve continuity between the settlor’s approach during life and the trustee’s decisions after death.
Drafting tips for a letter of wishes
Encourage clients to show that they have considered balance. A good letter of wishes should not read as though one beneficiary matters and the others do not. Where there is a life tenant and residuary beneficiaries, the letter can explain how the settlor would want the trustee to weigh those competing interests, with a few practical examples of appropriate support, whether an allowance, payment for housing or care, or contributions toward major purchases. The point is not to eliminate discretion, but to define the intended scope of support, and the trustee often benefits most from understanding not only what support the settlor favours, but why.
Keep the document current and grounded in the beneficiary’s actual circumstances. A recent expression of wishes is usually far more helpful than one written years earlier and never revisited, and regular review reduces the risk that the letter reflects family dynamics or assumptions that no longer apply. If the trust is meant to supplement employment income but the beneficiary is not employed or employable, the guidance should reflect that reality. Concrete guidance tied to the beneficiary’s actual life tends to be far more useful than abstract guidance.
Do not let the letter read as though it overrides the trust instrument. A letter of wishes should support, not compete with, the governing terms of the trust. If drafted as an alternative set of binding directions, it may create unrealistic expectations for beneficiaries and make the trustee’s task harder. Templates can help in getting started, but a letter in the settlor’s own voice is usually more persuasive and more useful than one that reads like a form, especially where the trustee may later need to explain why a decision is faithful to the settlor’s broader intentions.
Watch-outs
A letter of wishes is non-binding and must remain consistent with the trust’s governing terms. It should be prepared with care, because questions of confidentiality and disclosure can arise, particularly if the trust later becomes the subject of a dispute. And while it is tempting to draft very detailed directions in the hope of preventing future problems, too much prescription can backfire if it leaves the trustee no room to respond to circumstances the settlor did not foresee. Tone matters too: a letter that sounds distrustful or accusatory may make administration harder, even where the underlying concern is legitimate. The goal is to guide the trustee, not to script every decision in advance. A letter that is clear, current, and grounded in real circumstances is no perfect solution, but it may be one of the best ways to help trustees make difficult judgments in imperfect circumstances.
This article is intended as general information and not as legal or tax advice. Anyone considering a letter of wishes or trust planning should review their own circumstances with their professional advisors.
