By: Randall A. Denha, Esq.
Many people who embark on the process of estate planning spend a significant amount of time on the following: the who, what, when and how of distribution patterns to the beneficiaries; how much money is too much; what makes tax sense; how little can be left to the government and how much to the family; what can charity adequately receive, etc….However, very little time, if any at all, is spent on a “letter of instruction.” As reported by SmartMoney, a recent survey suggests that 56% of Baby Boomers have an estate plan but very few have appropriate “letters of instruction.” These documents are generally not legally-binding–unlike an estate plan–but they are instead explanatory instructions to help others understand your specific wishes. A letter of instruction serves as a “cheat sheet” for anyone involved in settling your affairs and provides them with a ready point of reference. The great thing is that, because these letters aren’t legal documents, you can include your own personal wishes and messages to your family.
These letters may include a variety of information that your heirs would want to know when you are gone. They are perhaps best viewed as supplements to your official estate plan, providing more explanation for the choices made in the legal documents of the plan. The letter may also include specifics on funeral wishes or even more practical information like PIN numbers and computer access codes. Letters of instruction can be used for many different things, but one of their main uses is simply to lead the person who must settle your estate through the process step by step in plain language that he or she can easily understand.
This letter can also outline more personal desires, including such details as where you want to be buried and the kind of funeral that you want. You can specify location, funeral home or even what type of flowers you would like, or whether you would like your ashes to be displayed at the ceremony. You can use the letter to voice other personal requests that may be inappropriate for a will or trust, such as a general sentiment about how you would like your heirs to use their inherited assets. You could even tell your aunt that she better not wear the blue hat with the giant bird on it to your funeral. Another advantage is you can use the letter to expand on your living will, elaborating on the medical conditions under which you would like to be taken off of life support in more detail than is permitted in a healthcare or medical power of attorney. Many people also include an ethical will inside this letter. An ethical will is a document that allows you to pass down your values, beliefs and ideals to your loved ones. Remember, this type of letter does not have to meet any kind of legal format or other formal requirements; it can be handwritten on plain notebook paper and kept in a file drawer if you like. Anything goes in a letter of instruction.
By no means exhaustive, a good letter of instruction should contain at least the following information:
• The whereabouts of any and all tangible assets that are not readily accessible
• The names, passwords, PIN numbers and account numbers of all liquid assets, including bank, brokerage, retirement and investment accounts
• The names and contact information of any bankers, brokers, attorneys or other professionals who handle your assets
• Preferred charities for donations, if they are expected instead of flowers
• Location of most recent copies of all financial and Social Security statements, tax returns, and legal documents (such as wills and trusts)
• List of all financial account beneficiaries and their contact information, if necessary
• The location of all titles and/or deeds for real estate property, rental property, oil and gas leases, etc.
• Your social security number and birth certificate
• Location (and keys to) all safe deposit boxes
• Any divorce and/or citizenship papers, or applications thereof
• Contact information of any debtors, such as mortgages, credit cards and car loans
• Contact information for any and all insurance coverage, especially life insurance
• Care and placement of any pets
• Contact information for all retirement account or estate beneficiaries
A letter of instruction provides an easy shortcut for those who will have to settle your affairs once you are gone. As with any other estate planning document, it should be updated at least annually and kept in a safe place where it is accessible by your relatives or executor. While this letter is not required in any technical sense, it can serve as a final gesture of consideration for those you have elected to settle your affairs.