Are you creating or updating your estate plan? Primarily, you need a will that divides up your assets among beneficiaries. Then you can complement it with other documents, such as financial and health care powers of attorney and various trusts.
What about all those other vital matters that must be addressed upon your passing, but may have fallen through the cracks? It’s often prudent to write everything down in a “letter of instruction” that’s meant to accompany your will.
Contents of the letter
Unlike a valid will, a letter of instruction isn’t legally binding. This means that your family isn’t obligated to carry out your wishes. Nevertheless, your letter is a viable way to tie up all the loose ends of your estate.
What should your letter address? Of course, it may vary depending on your personal circumstances, but the following are common themes:
Documents and assets. Begin by stating the location of your will as well as other important documents, such as powers of attorney, trusts, living wills and health care directives. Also, provide the pertinent details on your Social Security benefits, birth certificate, marriage license, and any divorce documents and military paperwork.
Next, create an inventory — a spreadsheet may be ideal for this purpose — of all your assets, their location, account numbers and relevant contacts. This may include, but isn’t necessarily limited to:
- Checking and savings accounts,
- Retirement plans and IRAs,
- Health and accident insurance plans,
- Business insurance,
- Life and disability income insurance, and
- Stocks, bonds, mutual funds and other investment accounts.
Don’t forget about liabilities. Provide information on mortgages, debts and other loans your family should know about.
Digital assets. At this point, virtually all your financial accounts should be available through digital means, including bank accounts, securities, retirement plans, etc.
It’s critical for your letter of instruction to inform your loved ones on how to access your digital accounts. Accordingly, the letter should compile usernames and passwords for digital financial accounts as well as social media accounts, key websites and links of significance. You don’t want family members locked out of accounts.
Funeral and burial arrangements. Usually, a letter of instruction will also include particulars about funeral and burial arrangements. If you’ve already made funeral and burial plans, spell out the details in your letter.
This can be helpful to grieving family members. It’s common to mention particulars like the person (or people) you’d like to give your eulogy, the setting and even musical selections. If you prefer cremation to burial, make that abundantly clear.
Provide a list of people you want to be contacted when you pass away and their relevant information. Typically, this will include the names, phone numbers, addresses and emails of the professionals handling your finances, such as an attorney, CPA, financial planner, life insurance agent and stockbroker. Finally, write down your wishes for any special charitable donations to be made in your memory.
Division of personal items. It’s not unusual for family members to quarrel over personal effects that aren’t specifically referred to in a will. Your letter might include beneficiaries of these personal items, including collections and awards, plus other mementos of sentimental value.
In this section, you can also provide information about the relocation and care of pets. Finally, you may write about your “hopes and desires” for the future, like preferences about schooling of grandchildren and religious affiliations.
Postscript to the letter
A letter of instruction isn’t just functional. It can offer peace of mind to your family members during a time of great emotional distress. It can be difficult to think about writing such a letter — who wants to contemplate their own death? — but once you start, you may find that letter mostly “writes itself.” Also, take comfort in knowing that you could be alleviating stress and avoiding family disputes in the future.
Finally, try to ensure the letter doesn’t conflict with other parts of your estate plan, particularly your will, and unintentionally lead to confusion or confrontation. Bring your attorney into the loop when the letter is completed or revised.
