What Is a Letter of Intent in Estate Planning?
Your estate plan says what should happen.
A Letter of Intent can help explain why.
Wills and trusts provide the legal instructions for what happens to your assets and who will be responsible for carrying out your wishes. But legal documents cannot always capture the family history, personal values, or reasoning behind the decisions you have made.
That is where a Letter of Intent can be helpful.
What Is a Letter of Intent?
A Letter of Intent, sometimes called a side letter, is generally a non-binding document that provides your executor, trustee, or other trusted individuals with additional guidance about your wishes, priorities, and values.
Think of it as context for the people who may eventually be making decisions on your behalf or administering assets for your beneficiaries.
For example, you might use a Letter of Intent to explain:
How you hope money held in trust for your child will be used
The values or priorities you want your trustee to consider when making decisions
Why one beneficiary may receive more or less than another
Your thoughts about education, housing, major purchases, travel, or other financial support
Family circumstances that may not be obvious from reading your estate planning documents alone
Your trust might give a trustee discretion to make distributions for a beneficiary. A Letter of Intent can give that trustee a better understanding of how you envisioned that discretion being used.
It can also help explain decisions that might otherwise create questions later.
Why Would I Need One?
Families are complicated. Estate planning documents have to translate those family circumstances into legally enforceable instructions.
Sometimes, however, the legal documents only tell part of the story.
Perhaps one child has already received significant financial assistance during your lifetime. Maybe another beneficiary has greater long-term financial needs. You may have specific hopes for how funds are used for a child or grandchild, or circumstances you want a trustee to understand.
A Letter of Intent gives you room to explain those details in your own words without trying to fit every thought into your will or trust.
Do I Need an Attorney to Write a Letter of Intent?
Generally, no.
A Letter of Intent is not typically a legal document, and you do not need an attorney to draft it for you. In fact, one of its advantages is that it can be written in your own voice and updated as your circumstances change.
You can think of it as a personal guide for the people who may eventually carry out your wishes.
The important distinction is that your Letter of Intent should support your estate plan, not change it.
If you decide that you want to change how assets are distributed, who is responsible for managing them, or the legal authority given to a trustee, those changes need to be addressed in your actual estate planning documents.
What Should You Include?
There is no single required format, but a helpful Letter of Intent may address questions like:
What do you hope your children or grandchildren will use inherited funds for?
Are education, homeownership, entrepreneurship, or other goals especially important to you?
Are there circumstances a trustee should understand when deciding whether to make a distribution?
Is there a reason beneficiaries are being treated differently?
Are there family dynamics that may not be obvious from your legal documents?
Are there values or priorities you hope the people administering your estate will keep in mind?
You do not have to answer every question or make the letter overly formal. The goal is simply to provide useful context.
How Often Should You Update It?
Your Letter of Intent should grow and change as your family does.
Consider revisiting it when:
You get married or divorced
A child or grandchild is born
Your children become adults
A child gets married or has children of their own
Your financial circumstances change significantly
Family relationships change
Your priorities change
You simply change your mind
A good rule of thumb is simple: Whenever a major life event causes you to review your estate plan, review your Letter of Intent too.
Even without a major event, it is worth reading through the letter periodically to make sure it still reflects what you would want today.
Make Sure Someone Can Find It
A Letter of Intent cannot provide much guidance if no one knows it exists.
Keep it with your estate planning documents or in another secure location that your executor or trustee knows how to access.
You do not necessarily need to share the letter with everyone in your family, but the people responsible for administering your estate should know where your important documents are located.
Your Estate Plan Provides the Instructions. Your Letter Provides the Context.
A Letter of Intent is one of the simpler estate planning tools you can create on your own.
It does not replace your will or trust, and it is not a substitute for legally updating your estate plan. What it can do is give the people you trust a clearer understanding of the reasoning, priorities, and family circumstances behind the decisions you have made.
Your estate plan explains what you want to happen.
Your Letter of Intent can help explain why.
If you are not sure where to start, use the questions above as a guide and write the letter in your own words. Then keep it with your estate planning documents and revisit it as your life changes.
And if the wishes described in your Letter of Intent no longer match what your will or trust says, that is a good sign that it may be time to review your estate plan with your attorney.
