Memorandum of Wishes

1 May, 2014 | Peter Smith

A Memorandum of Wishes is a document in which the settlor (person who creates the trust) sets out for the trustees of a trust how they want the trust managed particularly after death.
It’s often referred to as “ruling from the grave!”

Why do I need one, I have a Will?

A Will generally deals with all your property in your personal name, whereas a Memorandum of Wishes deals with your trust property.

If I don’t have one what happens to my trust property?

Without a Memorandum of Wishes, the trustees left after you pass away have no clear guidance on how you want the trust managed.

In a Will, the executor or trustee must carry out your instructions.  They have no power to exercise any discretion as to any distributions or beneficiaries.

On the other hand, trustees of a trust, have complete discretion as to how capital and income from the trust fund are distributed among beneficiaries (within the powers set out in the Trust Deed).

Trustees also have complete discretion as to the use of trust assets, for example allowing a beneficiary to live in a property owned by the trust.

Who can write a memorandum of wishes?

The settlor of the trust (the person who creates the trust) can prepare a Memorandum of Wishes.  The settlor can do this on their own or with the help and advice of a solicitor.

What sorts of things can I include?

As settlor a Memorandum of Wishes lets you make a clear statement of your intentions for setting up the trust.

You can provide guidance on how you want the trust managed including:

• Trust distribution date;
• Trust asset management;
• Distribution of Trust income and capital;
• Trustees use of discretionary powers; and
• Beneficiaries and any special circumstances – special needs children, tertiary education, funding for school experience travel etc.

Are they legally binding?

No!  By law trustees must have complete discretion BUT prudent trustees are unlikely to ignore a settlor wishes.

Because it’s not legally binding, this means it can be easily reviewed and updated to reflect any change in your circumstances.

If you wish to make any intended distributions legally binding, you should explore the option of a Deed of Distribution which is binding on the trustees.

Are there any requirements?

A Memorandum of Wishes should be signed and dated.  There is no requirement for the document to be witnessed but it can be.

Who can see my memorandum of wishes?

Only those people who you choose to show, as it is a confidential document, (provided this wish is recorded in your Memorandum of Wishes).

There is a presumption that all other trust information is to be provided to beneficiaries by the trustees.
We recommend that you share your Memorandum of Wishes with the other trustees, keep it safe with your lawyer in their deeds store room, and review and update it on a regular basis where necessary.

If you wish to create a Memorandum of Wishes or need any advice regarding family trusts please contact experienced Auckland Family Trust Lawyer, Peter Smith by phone on 09 837 6882 or email peter.smith@smithpartners.co.nz