Statements of Intent or Purpose in Estate Planning Documents

Posted by Matt Perkins | Feb 14, 2022 | 0 Comments

The reasons you, as a trustmaker, create a trust are certainly special and important to you, but your intent or purpose for creating a trust can also have significant legal ramifications. For this reason, it is often critical that a trustmaker express in writing their purpose for creating the trust. There are essentially two different ways of documenting a trustmaker's intent—each have 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[1] (UTC) specifically requires that a trustee administer a trust “in accordance with its terms and purposes” (emphasis added). The official comment for this section begins by stating the following:

This section confirms that a primary duty of a trustee is to follow the terms and purposes of the trust and to 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 it comes to expressing the trustmaker's purpose for establishing the trust. As a result, many trustees may not understand the trustmaker's purpose 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.”[2] 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.”[3] 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 of a trust may vary widely, but the importance of documenting the trustmaker's material purpose remains constant.

Language of intent or purpose in a trust document can also help beneficiaries understand the trustmaker's reasons and potentially ease any hard feelings among beneficiaries, particularly 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 with no guidance or direction about what the trustmaker 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 trustmaker 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 simply repeats time-worn legal phrases used in trust documents. A well-drafted letter of intent will express in plain English the trustmaker'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 who is exercising discretion in interpreting concepts such as “health, education, maintenance, and support.” If, for example, a trustmaker's true concern is to ensure that the cruise vacations the family took together continue after the trustmaker's death, they might include in a letter of intent a statement like the following:

Cruises have been a huge part of helping our family stay connected and building family relationships. Funding a cruise for all members of my family 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 trustmaker when they wrote the letter of intent.

Letters of intent can also guide a trustee when a trustmaker might have concerns about a particular beneficiary but does not want to detail such concerns in the trust document where they might prove embarrassing for the beneficiary and anyone else who reads the trust. For example, if a trustmaker is concerned about their beneficiary son's gambling addiction, 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 simply 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 (228) 460-5243 or email at [email protected]

[1] The Uniform Trust Code is a set of model laws based on the common law of trusts that are used by many states. Although they are not binding laws, they are influential in the states. To see which states use the Uniform Trust Code, visit https://www.uniformlaws.org/committees/community-home?CommunityKey=193ff839-7955-4846-8f3c-ce74ac23938d.

[2] Unif. Tr. Code § 411(b) (Unif. L. Comm'n 2000).

[3] Id.

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