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Memorandum of Wishes

When a Trust is established, the settlor usually has an intended purpose for the Trust, both during their lifetime and after their death. A Memorandum of Wishes allows the settlor of the Trust to inform the trustees what these intentions are.

Wednesday, April 4th 2001, 5:11PM

The trustees of a discretionary Family Trust need to have some direction from the settlors as to how the Trust should be run and how they should use their powers of discretion. The Trust Deed will provide some of this information, such as who the discretionary beneficiaries are, but guidance for the trustees in relation to other areas may be advisable if the settlors intended purpose is to be achieved. This is a fairly simple document, which can be easily changed as family circumstances change.

Areas covered by a Trust’s Memorandum of Wishes may include:

  • Trust distribution date
  • Management of Trust assets
  • Distributions of income and capital
  • Use of trustees discretionary powers
  • The maximum term that a Trust can run for is 80 years (with the exception of Charitable Trusts that can continue into perpetuity). However, Trust Deeds generally allow for distribution prior to this time if the trustees agree in writing to do so. The trustees, as independent parties, would need to know how long the settlor intended the Trust to run to effectively perform their duties.

    The trustees are charged with managing assets held within a Trust on behalf of the beneficiaries. The Memorandum of Wishes can provide the trustees with guidance in setting the strategy they should maintain both while the settlors are alive and after their death.

    Similarly, intentions regarding how and when the income and capital of the Trust is distributed can be set out in a Memorandum of Wishes. These may include whether all beneficiaries are to be treated equally or whether specific circumstances should be taken into consideration when making distributions. The settlors may also indicate that they intend for some or all of the income added to the capital of the Trust each year to enable further growth, or that all income be distributed to the beneficiaries.

    Trustees also have general discretionary powers in relation to the management of the Trust. A Memorandum of Wishes can direct how the trustees exercise these powers during the life of the Trust.

    It should be noted that while a Memorandum of Wishes is not a legally binding document, it is a useful addendum to the Trust Deed to provide guidance to the trustees on how the trust should be managed.

    The above information is of a general nature only as everyone’s personal circumstances are different.

    « The Personal Property Securities Act 1999: Ready, Set, File!Appointing A Trustee Company As An Agent »

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