Simplify Your Estate Settlement with a Letter of Instruction
A Clear Document Helps the Deceased and the Executor
It is very difficult for someone to administer their estate if they don't know where anything is or who should be immediately notified when the person dies.
— Kenneth Vercammen, estate planning attorney
Millions of Americans spend a great deal of money on various types of legal documents --- such as a will, trust or power of attorney --- to ensure that their worldly affairs will be taken care of the way they choose after they die.
While these documents can clearly outline what assets are to go to whom, they don't always give a breakdown of where the assets are or how to find or access them. This can cause major headaches for estate executors, who must track down and itemize the deceased's assets.
A letter of instruction can fill in this critical gap in any estate plan. Although it doesn't have formal legal authority, it can be a godsend for the person who must ensure proper disposition of the deceased's property.
What a Letter of Instruction Should Contain
Because it is not a formal legal document, there are no specific requirements as to what information a letter of instruction must contain or how it should be formatted. However, the letter should address several key issues. "It is very difficult for someone to administer their estate if they don't know where anything is, or who should be immediately notified when the person dies," said Kenneth Vercammen, an estate planning attorney in New Jersey
A letter of instruction should start with a complete list of assets and their locations, Vercammen said. If the deceased owned a boat at a remote lake, for example, then the letter should provide the location of the keys to the boat, the combination of the lock at the dock, contact information of the dock office personnel and other practical details.
If the executor is not a member of the family or the social network of the deceased, the letter should include the names and contact information of friends, family members and anyone else who will have to be notified of the death.
Letters of instruction also should list all usernames and passwords for online bank, brokerage and other financial accounts, as well as the location of financial and legal records and statements, Vercammen said. This includes Social Security statements, utility and other bills and payables, loans, mortgage paperwork, veterans' benefit statements and all investment, retirement and bank statements, as well as insurance policies and income tax returns.
The title deeds to the house and all other property should also be included, with contact information for the court of each county in which the deceased owned property, as well as all estate planning documents, including the will and any trusts or powers of attorney. If these items are in a safe or safe deposit box, the combination or location of the key and other pertinent information should be listed.
The names and contact information of financial advisers, brokers, insurance agents, tax professionals and attorneys also should be included, Vercammen advised.
A self-study course on estate planning offered by Montana State University says that many such letters also address burial arrangements, outlining such details as where the deceased wants to be buried and what funeral home should be used, as well as preferences for the memorial service, including floral and pictorial arrangements, music and speaking suggestions, coffin or casket preferences and instructions pertaining to disposal of the body, such as embalming or cremation.
Other details often covered in these letters include a sample obituary, which might need periodic updating, along with a breakdown of charitable or other organizations or people chosen for miscellaneous donations not specified in other documents, such as those of a sentimental nature.
Letter Placement, Maintenance and Revisions
The MSU course also outlines how to distribute and store a letter of instruction. In most cases, the original remains in the author's possession --- filed with the rest of the estate planning documents --- while copies are provided to the attorney, the executor, and family members and friends at the discretion of the author. An additional copy may be kept in a secure place, such as a safe deposit box in a bank.
As with all estate planning documents, letters of instruction should be revised according to changes in the wishes or circumstances of the author. Marriage, divorce, births and deaths of family members and other factors can alter an estate plan and, most likely, the letter of instruction that goes with it.
The author should periodically monitor this letter along with the rest of the estate plan to ensure that it is current and accurate. Changes in the author's assets or the locations or people associated with them should be recorded in this letter, which may not be necessary in a will or trust.
The Human Touch
Although other elements of the estate plan, such as wills and trusts, actually carry out the wishes of the deceased, they are cold legal documents that derive their power from the finality of death. Letters of instruction, however, can provide more than mere practical information for the executor.
"Letters of instruction can also be used to comfort the executor that they are doing the right thing and express love for him or her or other friends or family," said Randy Gardner, professor of tax and financial planning at the University of Missouri-Kansas City's Henry W. Bloch School of Management.
"Because these letters can be written in a casual tone, they can serve as a final, albeit one-sided, form of dialogue between the deceased and the executor, where the deceased can reassure the executor that he is doing the right thing, thank him for his efforts and perhaps say a last goodbye, or even share something personal or sentimental that was previously unsaid."
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