October 30, 2020
By: Bridget A. Alzheimer, Esq., Ryan A. Brown, Esq., and James F. Anderson, Esq.
Download our FREE template Instruction letter
Formal Estate Planning (executing a Last Will and Testament, settling a Trust, preparing Financial and Medical Powers of Attorney) involves a great deal of thought and often significant consultation with your attorney, financial advisor, and accountant. But as vital as the resulting legal documents are, they may not be sufficient to answer all the questions your loved ones may have in the event of your incapacity or death. Ideally, the legal documents of your estate plan would be supplemented by an informal letter of instruction, outlining all the information your agents should know in order to wrap up your affairs and enact your wishes.
A letter of instruction can include as much or as little detail as you prefer, and you may find that multiple letters will best serve your purposes, allowing you to include only the information that a particular person needs to know. The template letter provided at the end of this discussion contemplates a single personal representative who is also a close family member. If you have appointed different fiduciaries for various roles or if your personal representative is not a close family member, you may wish to adjust the template accordingly.
As the letter of instruction is informal, it can be revised and updated easily without the assistance of an attorney and without formal notarization (unlike most estate planning documents). We strongly encourage our clients to review their letter of instruction regularly (annually, semiannually, or even quarterly) to keep information up to date and to reflect changing circumstances. Consequently, it is important that your letter of instruction shows a clear date of creation.
The discussion below is intended to stimulate your thinking regarding what information might be appropriate to include. Throughout this discussion we use the terms "agent" and "agents" to include executors and personal representatives, agents under powers of attorney, and trustees of trusts.
Questions to Answer in your Letter
Who?
Your agents will need details regarding the people in your life. Consider who should be directly notified of your death and who may provide necessary information to your agents about your financial and medical affairs. This will likely include family members, beneficiaries, advisors (such as your financial advisor, accountant, and attorney), and financial professionals (such as your banker or broker). It may also include doctors, business partners, friends, people or businesses that might be relevant to final arrangements for the disposition of your body after your death, and other connections.
What?
Your agents will need to know what needs to be managed and what instructions you have provided regarding such management. What are the legal documents you have prepared? What are your assets and liabilities? What are the various services you have been paying for? Do you have recurring items of income and disbursement? Who are your attorneys, accountants and financial planners? Each of these professionals may have more information to assist the personal representative.
Where?
Chances are, you've put certain things in a safe place and your agents will need to know where to look for documents and information. Where have you filed your legal documents such as your Last Will and Testament and the Deed to your home? Where have you stored records of your electronic accounts and the information needed access to those accounts? If information is accessible through online portals, provide the necessary website addresses and consider letting your agents know where to find the necessary login information.
When?
There may be significant dates or events that will need to be noted in order for your agents to carry out your wishes and manage your affairs. Does a business you own operate on a fiscal year? Have you been required to make quarterly estimated tax payments? When are Certificates of Deposit or bonds scheduled to mature? When, and to whom, are installment payments (i.e. mortgage, HELOC, etc.) due? What recurring charges, accounts, and services have you established and when do they come due? Is there a large debt due for payment?
How?
Consider that an agent may need to step in to assist you in the event of incapacity. Tell your agents where to find your Durable General Financial Power of Attorney, or, if you have not prepared one, indicate who you would want to serve as your guardian and conservator should it become necessary.
Your Advance Medical Directive and Medical Power of Attorney document may describe your preferences for how and where you will live if your health deteriorates. If you have not prepared one, then you should tell your agents how and where you would want to live, if you have any insurance policies that might be provide funding for your care, and if, with or without insurance coverage, you want your care expenses funded in a certain way.
If you want your financial agent or trustee to continue patterns of lifetime giving to family, friends, or charities, make sure that power is included in the Durable General Financial Power of Attorney and/or Trust that you sign, and then provide more detailed instructions in your letter.
Your Advance Medical Directive and Medical Power of Attorney can also ease the decision-making process for your loved ones and describe your preferences for a funeral service, wake, and burial. If you have made arrangements for the disposition of your remains that are not included in your Advance Medical Directive and Medical Power of Attorney, make note of where that information can be found.
Often a Last Will and Testament or Trust references a Tangible Personal Property Directive, providing your executor or trustee direction for the distribution of your tangible personal property (e.g. furniture, art, vehicles or jewelry). If you wish a specific item or category of item to go to a specific person, make sure that you have completed your Tangible Personal Property Directive and that your instruction letter tells your executor and, if applicable, your Trustee, where to find that Directive.
Conclusion
Ultimately, your informal letter (or letters) are meant to simplify the process of dealing with your affairs in the event of your incapacity or death by providing persuasive advice, rather than binding legal requirements. By making your wishes clear in advance, you can save time for your loved ones and provide them with additional peace of mind. The more thought and detail you include in your instructions, the easier it will be for your agents to execute your plan and reduce the time and administrative costs associated with administering your affairs. Consequently, revisiting and updated your letter every year or more frequently is a good practice to ensure the information captured is up to date and reflects your current thoughts.
Arlington Law Group regularly assists clients to prepare their legal estate planning documents. Please contact us to arrange an initial estate planning consultation.
