In the case of In the matter of Rabaiotti 1980 Settlement  JLR 173 it was held that "if trustees slavishly follow a letter of wishes, their decision can be quashed on the grounds that it is not, in truth, the decision of the trustee".
In a recent judgment, a trustee requested the Guernsey Court's blessing to distribute the assets of the trust in accordance with a letter of wishes in order to limit any future challenge of the trustee's decision.
The Court considered the following factors as important when considering whether to approve the decision of the trustee:
- The trustee had sought legal advice;
- The trustee was aware of the requirement for it to exercise its own discretion;
- The trustee did not rush into making its decision;
- The trustee met with the beneficiaries who were receiving the shares that may be considered unfair and gave them the opportunity to raise any concerns.
The Court emphasised the importance of a trustee making reasoned decisions and recording those decisions. The Court referred to the question asked in the case of In the matter of the Mischa Trust (Guernsey Royal Court, 15/2010), namely "Is the decision... one which a reasonable trustee properly instructed could have arrived at?"
The weight to be attached to a letter of wishes will differ depending on the facts and circumstances of the particular trust in question.
On the basis of the factors set out above, the Court blessed the trustee's decision to distribute the trust fund in accordance with the letter of wishes.
This judgment is a reminder of the importance of trustees acting independently, taking relevant professional advice and carefully considering all relevant factors when exercising their powers. If the trustee has undertaken an autonomous process which involved the factors set out above, a Court is more likely to support the trustee in the exercise of its discretionary powers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.