Which one wins: The trust deed, the will or the letter of wishes?
Many people believe that estate planning is having a will, but having a will is only one part of the plan.
Where people also have trusts and letters of wishes, those documents will have often been drafted by different service providers, who may not have considered, or even been aware of, other relevant documents, and who may not even specialise in providing such services. This may cause a conflict between the various documents, leaving the deceased not having achieved his or her objectives on death, and even having been abused.
The court expressed its concerns about the bad quality of wills in Raubenheimer v Raubenheimer (2012), but the same can be said about trust deeds and letters of wishes. The court concluded that estate planning, wills, succession and the administration of deceased estates are inextricably linked to the proper drafting of a will. The following was said in this case: “It is a never-ending source of amazement that so many people rely on untrained advisers when preparing their wills, one of the most important documents they are ever likely to sign. This is by no means a recent phenomenon. Some 60 years ago a high court decried the number of instances in which wills had to be rejected as invalid due to a lack of compliance with prescribed formalities and the regularity with which the courts were being approached to construe badly drafted wills, before urging intending testators ‘in their own interests, as well as in the interests of those whom they intend to benefit when they die to consult only persons who are suitably trained in the drafting and execution of wills and other deeds containing testamentary dispositions’. Despite this, the courts continue all too often to be called on to deal with disputed wills which are the product of shoddy drafting or incompetent advice.”
In South Africa, there is freedom of testation, which means that you have the right to determine the heir(s) to your property as you wish. This is done in a will.
Since January 1, 1954, all wills must be in writing. A will is a formal, signed, written (written by hand, typed or printed) document, in which you voluntarily sets out your instructions in unambiguous terms as to how your assets are to devolve following your death.
Your will is a living document and should always be up to date and reflect your current wishes in terms of how you would like your assets to be distributed upon your death.
In the context of estate planning, a trust can be described as a legal relationship that has been created by a person (known as the founder, donor, or settlor) through placing assets under the control of another person (known as the trustee) for the benefit of third persons (the beneficiaries).
A trust is either a contract (Crookes v Watson, 1956) that is brought about by a person (the founder) when he or she is alive (an inter vivos trust), or it is a testamentary disposition (a testamentary trust) that is brought about on the death of a person.
A trust can also be created in terms of a court order (court order trust), such as a divorce order.
The legal principles applicable to inter vivos trusts are to be found in the law of contracts. This means that the principles that apply to the execution of a valid contract also apply to the execution of a valid trust deed. Because a trust is regarded as a contract, the courts will look at the substance of the arrangement rather than simply looking at the trust deed - the constitutional document of the trust.
Letter of wishes
A letter of wishes is a way for you to inform others of matters to be taken into account after your death. It may, for example, contain guidance to the guardians of minor children detailing how you might want your children brought up in terms of education, religion or residence.
A letter of wishes is a separate document to your will, but it accompanies your will. It is not legally binding but can guide your executors and trustees to ensure that your personal wishes are carried out. You should take care that a letter of wishes does not contain anything that could conflict with your will.
A letter of wishes should be written in plain English, signed and dated, but not witnessed, so as to avoid any claim that it has become a legal will or codicil (an addition or supplement that explains, modifies, or revokes a will or part of one).
There is an ongoing debate as to the role of a letter of wishes and whether a letter of wishes should be seen as part of the trust deed.
A letter of wishes is not legally binding on the trustees, but can be taken into account by them. Where trustees have been given wide discretion in a trust deed, it is important for them to have an understanding of what the founder had in mind when he or she created the trust, and exercise their discretion accordingly.
The trustees should certainly be influenced, but never dictated to, by a letter of wishes. If the trustees follow only the letter of wishes and do not apply their discretion, they risk being attacked by beneficiaries and creditors.
In the event that the trust deed and will conflict, the trust deed, as contract, will, in principle, override the will. If, however, it goes to court, the intention of the testator/testatrix will play a major role in the interpretation of the two documents.
Phia van der Spuy is a registered Fiduciary Practitioner of South Africa, a Master Tax Practitioner (SA), a Trust and Estate Practitioner and the founder of Trusteeze, a professional trust practitioner.