If you're looking for a way to simplify a complex inheritance structure for your heirs, or just want a way to stick it to Aunt Martha one last time, then a letter of instruction is what you need. Unlike a will, this letter doesn't have any legal authority, but it can provide an easy to understand explanation of your overall estate plan to your executor. It 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.
In this article we'll take you through everything you should include in your letter of instruction and explain what it can and can't do for you. (To begin with the basics, read Getting Started On Your Estate Plan and Six Estate Planning Must-Haves.)
A Simple Remedy
One of the most important features of a letter of instruction, sometimes called a letter of intent, is it provides specific information regarding personal preferences in medical or funeral care or details concerning dispersion or care of personal assets that legal documents may not be able to outline. 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.
A good letter of instruction should contain at least the following information:
- A complete list of all assets, both liquid and illiquid
- 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 (To learn more, read Managing Your Documents To Minimize Disaster.)
- The names and contact information of any bankers, brokers, attorneys or other professionals who handle your assets
- Informal information regarding the dispersion of assets, such as who would get a sentimental possession or heirloom (the will may state that these articles are to be distributed according to the letter)
- 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) (To learn more about wills, read Why You Should Draft A Will.)
- 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. (For related reading, see Protect Your Kids And Pets With Custom Insurance.)
- Care and placement of any pets (To find out how to care for Fido after you pass away, read Keep Your Pets' Trust.)
- Contact information for all retirement account or estate beneficiaries (To learn how to protect all of the important information you've just collected, read Identity Theft: How To Avoid It and Keep Your FInancial Data Safe Online.)
In the next section of the article we'll show you how you can use a letter of instruction to augment your regular will, or leave a personal message for your loved ones.
Make the Letter Your Own
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; micromanagers can even use these letters as chance to write their own obituaries.
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.
For further reading on estate planning, check out Three Documents You Shouldn't Do Without.