Statements of Intent or Purpose in Estate Planning Documents

The reasons you, as a trustor, create a trust are certainly special and important to you. Still, your intent or purpose for creating a trust can also have significant legal ramifications. For this reason, it is often critical that a trustor expresses in writing their purpose for creating the trust. There are essentially two different ways of documenting a trust maker’s intent – each has slightly different purposes, and sometimes both are generally called a “statement of intent.” Let us examine each of them.

Statement of Intent or Purpose within the Trust Document

It is interesting to note that section 801 of the Uniform Trust Code (UTC) specifically requires that a trustee administer a trust “by its terms and purposes” (emphasis added). The official comment for this section begins by stating the following:

This section confirms that a trustee’s primary duty is to follow the terms and purposes of the trust and do so in good faith. Only if the terms of a trust are silent or for some reason invalid on a particular issue does this Code govern the trustee’s duties.

Yet most trust documents are strangely silent when expressing the trustor’s purpose for establishing the trust. As a result, many trustees may not understand the trustor ideal for creating the trust they are now tasked with administering. A solution to this dilemma is to include a statement of intent or purpose as a separate provision in the trust document.

Further, a trust’s purpose will not only guide the trustee in administering the trust, but it can also determine whether a trust can be modified or terminated by a court. The UTC provides that a trust may be modified with all the beneficiaries’ consents if a court concludes that the modification is “not inconsistent with a material purpose of the trust.” Under the UTC, a trust may be terminated with all of the beneficiaries’ consents if a court finds that “continuance of the trust is not necessary to achieve any material purpose of the trust.” Some possible examples of a trust’s material purposes are

  • to eliminate or reduce estate taxes;
  • to protect the trust’s accounts and property from beneficiaries’ creditors or divorcing spouses;
  • to educate trust beneficiaries in financial management;
  • to provide for a disabled beneficiary; and
  • to preserve the family home, regardless of the cost, so that your family can enjoy it for many generations to come.

The material purpose may vary widely, but the importance of documenting the trustor’s material sense remains constant.

Language of intent or purpose in a trust document can also help beneficiaries understand the trustor’s reasons and potentially ease any hard feelings among beneficiaries, mainly if money and property are to be divided unequally or one beneficiary is to receive a unique piece of property or beloved family heirloom. A statement such as “I leave Great-grandma Johnson’s wedding band to my eldest daughter in keeping with the Johnson family tradition of passing it from eldest daughter to eldest daughter” might soothe your youngest daughter’s hurt feelings if she believes she was passed over simply because her elder sister is the favorite.

Letters of Intent Apart from the Trust Document

While you may know in great detail how you want your estate planning wishes to be carried out, it is not always wise to include every detail in the trust document. It is often necessary to leave some discretion in the hands of the trustee to provide some flexibility in administering a trust that may last for many generations. By way of illustration, few people would disagree that, in general, members of the Greatest Generation have a different point of view (on any number of topics) than Millennials. For example, the question “What is necessary for one’s health, education, maintenance, or support?” would most likely result in very different answers from members of the two generations. We often expect trustees to answer such questions without guidance or direction about what the trustor meant. On the other hand, your estate planning attorney may hesitate to include too much detail in your trust document for fear of tying the trustee’s hands when circumstances and expectations inevitably change over time. This situation is where a letter of intent can be essential.

In general, a letter of intent is a nonbinding letter from the trustor to the trustee that guides them in exercising their discretionary powers. A letter of intent should not be a law firm’s form letter that repeats time-worn legal phrases used in trust documents. A well-drafted letter of intent will express in plain English the trustor’s goals or purposes that might be imprudent or puzzling if they were included in the trust document itself. A letter of intent can provide additional guidance to a trustee exercising discretion in interpreting concepts such as “health, education, maintenance, and support.” If, for example, a trustor’s genuine concern is to ensure that the cruise vacations the family took together continue after the trustor’s death, they might include in a letter of intent a statement like the following:

Cruises have been a massive part of helping our family stay connected and building family relationships. Funding a cruise for all family members is something I would do if I were living; please make generous distributions for these opportunities because they have tremendous benefits in terms of family connectedness.

The above type of direction can ease a trustee’s concerns about whether money was intended to be used in such a way while not binding their hands to make such distributions if they otherwise deem it imprudent because of changed circumstances unknown to the trustor when they wrote the letter of intent.

Letters of intent can also guide a trustee when a trustor might have concerns about a particular beneficiary but does not want to detail such problems in the trust document. They might prove embarrassing for the beneficiary and anyone else who reads the trust. For example, suppose a trustor is concerned about their beneficiary son’s gambling addiction. In that case, they might include in their letter of intent a statement such as “Do not give money outright to my son because I worry that he will gamble it away. I prefer that you make distributions directly to the payee.”

Updating Your Purpose

As changes in your circumstances occur over time, you should review your estate plan to ensure that it still accurately reflects your wishes. You should also regularly review any statements of intent within your trust document or letters of intent apart from your trust document to ensure that they, too, accurately communicate your wishes. If you are interested in learning more about including these statements or letters in your estate plan, call us.

At Cheever Law, APC, we don’t just draft documents; we ensure you make informed and empowered decisions about life and death for yourself and the people you love, which starts at a valuable and educational Family Wealth Planning Session. The Life & Legacy Planning Session will allow you to get more financially organized than you’ve ever been before and make all the best choices for the people you love. If you have already completed your estate plan, we will review that plan at your Life & Legacy Planning Session (aka Family Wealth Planning Session) to ensure that it will work the way you intend and address any holes or gaps that may be present if circumstances have changed since you executed your plan.   

To learn more about our one-of-a-kind systems and services, contact us or schedule a 15-minute introductory call today.