When the topic of estate planning comes up with a client, often they will explain that they have a plan in place with a will, power of attorney, trust, etc. However, often they overlook an important item… a letter of instruction. To be clear, a letter of instruction (or LOI) is not a legal document and isn’t required for probate, trust administration, etc. However, done right, a letter of instruction can greatly ease the emotional and mental burden on your loved ones in what is likely to be a difficult period of time for them.
In simple terms, a letter of instruction provides guidance to your survivors, heirs, and loved ones. You can tell people where to find important stuff, who to contact for help, or any other information that you think might be helpful in your absence.
A letter of instruction is almost essential in families where one person manages the financial/admin tasks and survivors will face a learning curve to take on these tasks. If two spouses are equally familiar with their financial affairs, then a letter of instruction may be superfluous.
Since letters of instruction are not legal documents, they do not have any proscribed form or structure. Often, you’ll simply want to pretend you are writing a letter to your loved ones. Plain English and heartfelt/honest communication is best. You can include as much or as little information as you want. And nothing is set in stone… feel free to amend your letter of instruction at any point. It is a great idea to make sure that your loved ones know where to locate your letter, and if you feel comfortable doing so, it can make sense to share the letter with others ahead of time.
As a rough guide, here are a few ideas for what you may want to include in your letter of instruction:
Personal Messages
In the event of your death, you may want to deliver personal messages to the people you were close with in your life. These can provide some additional comfort to loved ones. These personal messages could include a packet of separate, individual letters or whatever is appropriate for your needs.
Contact Information
If you die or become incapacitated, your friends and family will want to know. Certain advisors or business partners may also benefit from notification. List out the names and contact information for each of these folks.
Primary contact… Likely the same person as your executor or trustee. It’s a good idea to provide an alternate or two as needed.
Secondary contacts… List any friends, family members, employer, business partner, or advisors (including financial, tax, legal, or even spiritual) here.
Dependents
If you have people or pets who are dependent on you, be sure to provide all information needed to secure their ongoing care. This can include minor children, adult children with additional care needs, older adults or parents, or pets.
Include any child support payments you make or receive and the location of any related court documents. Also include contact information for your child’s other parent/guardian if appropriate.
Provide as much information as you can about your dependent. The goal is to inform the new caregiver so they can get up to speed quickly. Information such as hobbies, habits, allergies, diet requirements, medications, doctors, fears, interests, educational details, sports, etc. Make a note of the location of birth certificate, medical records, school records, etc.
If you plan on a family member or friend taking over care for your pet, be sure to include a plan for funding care and any special considerations.
Important documents
List the location of important documents and how to access them. Essential documents generally include:
Personal Documents…
- Birth/marriage/death certificates
- Social Security card
- Will, trust agreement, power of attorney, etc.
Financial Documents…
- Account statements
- Insurance policies
- Pension/annuity documents
- Real estate deeds
- Vehicle titles
- Tax returns
- Business documents
Financial data
Paying bills can get tricky if you aren’t in the habit of doing so. To avoid the agony of late fees, service cutoffs, etc. be sure to leave a list of when bills need to be paid and how much they generally cost. If you have income coming in on a regular basis, list out how much and from what source. List out all of your important accounts (banks, investments, loans, credit/debt cards, etc.). Include the name of each financial institution, account numbers, owners/titling, any beneficiary designations or transfer on death or payable on death (TOD/POD).
If you have a business, include ownership documents and continuity planning instructions.
Tangible property
List out any real estate you own and the location of the relevant documents, including maintenance providers, etc. Be sure to mention any care instructions such as lawn mowing, gutter cleaning, cleaning service, etc. If you live in a rental property, list out your landlord’s information. If you own a rental property, list out the tenant’s information.
List out major personal property such as cars, boats, etc. Provide details on how to care for each item including recommended service centers, warranty information, etc.
List out any personal property that requires special handling (i.e. outside of your will or trust). Generally, this will include items with little monetary value, but high sentimental value such as heirlooms, photo albums, or items with special meaning to a loved one. If you have any items that could be embarrassing and require discretion, you can include instructions for how to protect or destroy them.
Digital property
It’s important to provide access to a list of digital accounts and passwords. Consider using a password manager.
If you want to immediately cancel your Netflix subscription, be sure to mention that. Social media accounts can often be transferred at death, but require special handling.
Any cloud data providers deserve special attention. These days many people store a lot of their important information with services such as Google Drive, DropBox, or Microsoft OneDrive. Provide instructions on how to access and manage this data. If your phone or computer stores large amounts of your personal data, be sure to include instructions around how to access and process that data.
If you have digital assets such as domain names, websites, etc., include detailed instructions for how to manage them or monetize them.
Funeral and obituary
If you have preferences about your funeral or burial plans, be sure to leave them in an accessible place. Generally, your executor won’t have time to access a safe deposit box in time to make the relevant decisions.
Already have a burial plot? Be sure to mention that! List any preferences for a funeral home, services, and final resting place, preferred pastor or religious leader, etc.. If you prefer that people make donations in lieu of flowers, include that information along with the contact information of the charity. Include desires for the funeral ceremony (music, location, speakers, etc.).
Speakers at your service will benefit from details about your life, such as where you were born and where you went to school or other anecdotes you would like shared at your service. Read a few obituaries to get an idea of the information typically required.
If you want an obituary published, provide some bullet points to include (or write it yourself!) as well as details about where to publish it. Don’t forget your epitaph.
Final thoughts
Your letter of instruction can take almost any form that you want. The goal is to reduce the hassle and friction that your loved ones will experience in the aftermath of your passing. Grief is hard enough, so a well done letter of instruction can really help out.
And don’t forget to update your letter of instruction as your life changes. If you can, review it every year or two. When you make changes, consider destroying the old letter to avoid confusion.
