Let's share the critical details that are missing from your estate plan

By Bill Jackson May 18, 2024 12 mins read 144 Views

By Christopher Avery, Guest Writer

“Death never takes the wise man by surprise, he is always ready to go.” — Jean de La Fontaine

Let's share the critical details that are missing from your estate plan

Most people are un- or under-prepared for their inevitable death. Even if you have a will or trust in place, you may not be aware that some of the most important and timely information that your family will need is missing from your estate plan. Today, we'll summarize the simple steps you can take to create your letter of instruction that will help fill in those gaps in common estate planning documents. A letter of instruction allows your surviving family members and friends to be better equipped to make decisions aligned with your preferences; locate all the information they will need to provide for themselves; and, more importantly, help ease the burden on your surviving family.

Why Aren’t My Traditional Estate Planning Documents Enough?

If you have a will, that’s great; you are already ahead of more than half of US adults who do not have a basic will in place. The reason that wills, trusts, and powers of attorney fall short is that they are prepared for a specific purpose—to set legally binding decisions and override certain default presumptions during the probate process. These legal documents put someone in charge (e.g., executor, trustee, attorney-in-fact), name a guardian for minor dependents, address the general disposition of any assets and personal property, and authorize your representatives to act on behalf of your estate.

Beyond these core issues, these legal documents rarely go into the details, especially when those details are highly likely to change over time. For example, traditional estate planning documents typically do not provide detailed instructions regarding your final arrangements, do not identify the specific assets and liabilities of your estate, and do not provide specific instructions to your loved ones that would help them resolve the many issues that they are likely to face that are outside the scope of these legal documents. These topics are rightly excluded because it would be difficult, time-consuming, and expensive to have to update your will or trust documents every time these instructions and preferences changed.

A letter of instruction is a non-legally binding document that you can prepare yourself—without a lawyer—to help supplement your traditional estate planning documents with information and guidance that your family will need when you pass.

More information here:

Will vs. Trust: What’s the Difference?

We Redid All of Our Estate Planning: Here’s How We Made Sure to Find Emotional Peace

What Goes into a Letter of Instruction?

The following is a brief outline of the types of topics that can be included in your letter of instruction. Naturally, the contents of your letter should be tailored to your specific circumstances, and they will change over time. If there are topics that you aren't interested in addressing, are not applicable, or are in areas where you have no preferences, it is fine to omit these topics from your letter. If you are married or partnered, it is common to have a joint letter of instruction that includes person-specific preferences set out for each spouse.

#1 Final Arrangements

Shortly after you die, your family is going to have to make quick decisions about what is done with your remains. If you have a preference or a religious custom regarding your remains, it's important to make this known. While you may have told your spouse or partner, they might not be in a position to help (because of grief or advanced aging). It is often your adult children or family friends that must make these arrangements. If you have made advance arrangements—such as planning a pre-arranged burial, purchasing a spot in a mausoleum, or donating your remains to science—you need to share the details of those arrangements and where that documentation is stored.

Some people will have specific preferences about a memorial service, the type of service, who should be asked to officiate, music/readings, whether specific people should be asked to say a few words, any funeral honors because of past military service or membership in an organization, and whether donations should be made to a charity in lieu of flowers. If you have these types of preferences, a letter of instruction is a good opportunity to spell these out. Similarly, if you have preferences for your obituary, it is best to share those details in advance. If you do not have strong preferences, it is equally important to let this be known so that your family does not fret about what you may have wanted.

#2 Estate Plan

Your letter should state where the original, signed version of your will, trust, advance healthcare directive, and power of attorney are stored. It is also helpful to include the name and contact information of the law firm that prepared these estate documents and whether they should be consulted during the probate process.

It is important to remember that a letter of instruction is not legally binding like a will or trust. Your letter should not be used to attempt to change an executor, trustee, beneficiary, guardian, or any other term in a legally binding document. The letter of instruction serves to express your preference and inform the decisions of your representatives when they have discretion. If you would like to change the terms of your will or trust, this should be done in consultation with your attorney.

#3 Care of Dependents

If you have minor children or other dependents, your will is the legally binding place to name one or more guardians. However, attorneys frequently discourage including additional details that may help with the care of these dependents that are likely to change as the dependents age. A letter of instruction can be used to express those additional preferences or other wishes that you would like the guardians to know about the care of any dependents. For example, preferences about education, religious beliefs, visitation preferences for extended family members, or other instructions. If you have made financial arrangements for your dependents, like a trust, it is helpful to share these details with the selected guardians along with the trustee’s contact information. If a child is adopted, you should disclose where those records are stored and if you have a preference on the appropriate time and age to inform the child.

#4 Financial Assets and Liabilities

letter of instruction

This section of the letter is likely to resonate the loudest with WCI readers. Locating your assets and liabilities is one of the most time-consuming parts of the probate process. Knowing this information is also crucial for your family to provide for their short- and long-term financial needs. If they do not remember that you never rolled over that old 403(b) from a former employer, it may be lost for years until it eventually escheats back to the state.

Here are some asset types that you might want to catalog in your letter:

Checking and savings accounts
Safe deposit boxes
Retirement accounts
Investment accounts
Insurance policies and annuities
Collections
Personal loans (when you are the lender)
Employment benefits
Business interests
Unsatisfied court judgments or settlements (when you are the plaintiff)
Virtual or cryptocurrency
Loyalty or rewards programs
Intellectual property (e.g., patents, copyright, trademarks)
Other assets of significant value

With each of the above, it is helpful to list the account number, account owners, beneficiaries, and the locations where any relevant documents are stored. It is also helpful to share where you store checkbooks, the keys to safe deposit boxes, and the appraisals for any valuables.

It is also important that your letter provides a roadmap of your liabilities: mortgages, personal loans or lines of credit, credit cards, payment plans, personal debts, unsatisfied judgments or settlements, and any other significant liabilities. While not thought of as a traditional liability, if you have made any charitable pledges that are outstanding, it is important to share the names of the charities and a description of the pledges.

#5 Real Estate and Vehicles

For each piece of real estate that you own, you should list the names of the owners, how the property is titled, the date it was acquired and the cost (or estimated value), information about any mortgages, the description and cost of any improvements, and where related documents are maintained (e.g., title, closing statement, title and property insurance, appraisal, surveys, etc). If the property is rented, provide the contact information for any property manager and say where the current lease documents are stored.

For each vehicle that you own, you should list the named owners, where the vehicle and keys are generally kept (especially if not at your primary residence), your insurance carrier and your agent’s contact information, and whether any loan is outstanding. It is also helpful to note where any maintenance records are kept.

#6 Personal Property

If you have valuable personal property and you have preferences for who receives it, it would be helpful to identify the articles of personal property, where it is generally stored, and any documentation (e.g., inventory, appraisals, warranties, receipts). When it comes to bequeathing personal property, about two-thirds of US states allow people to dispose of tangible personal property (e.g., furniture, art, jewelry, household items) using a personal property memorandum (PPMs) in conjunction with their will. A PPM is a less formal document that lists the property and who should receive it. The PPM can be updated more easily because it does not need to follow the same formalities of a will. If you have a PPM, you should keep a copy with your letter of instruction and will.

While we think of Fido as a member of the family, pets technically are our property. Especially if you live alone, it is important to specify who should be asked to care for your pets (including a backup), any instructions you may have, and the name of the pet’s veterinarian. If your animal has been chipped, share where that number and documentation can be found.

If you have any PO boxes, storage units, or lock boxes, it is important to identify these and where the associated keys and access codes are stored. Whenever possible, make advance arrangements with the storage provider to list one or more authorized individuals who are allowed access. If this is not done prior to your death, many providers may require a court order that you can't obtain until the probate process is well along.

#7 Electronic Devices and Online Accounts

It used to be that someone could go through your home files and mail and get a good sense of your records. Now, with the online storage of documents and emailed statements, it is growing increasingly difficult to locate the necessary information unless you leave some digital breadcrumbs to where these are saved on your electronic devices or online accounts. There are a few things you can do in advance:

Share Access

Many online platforms allow you to share folders, content, or account access with others. For example, my wife and our two siblings (the named guardians for our minor children) all have access to the same Google Drive folder where our letter of instruction is saved. Even if something happened to us both, our brothers would still have access to our letter.

Platform Settings

The large platforms are beginning to address this issue with pre-set sharing preferences, like Apple’s Legacy Contact and Google’s Inactive Account Manager. These settings, made by you, allow your trusted contact to get access to your data automatically or to request access to the data from the platform.

Password Managers

Many password managers offer family plans that allow passwords to be securely saved but shared among a trusted group. If you are old-fashioned like me, I make a printed log of my most important usernames, passwords, and device access codes that I store in our fire-resistant lockbox. If you keep a password list, I highly recommend that you separate it from your digital letter of instruction so that it can be kept under lock and key.

If you use two-factor authentication on any online account, it is usually possible to use an authentication app that allows the same one-time codes to be displayed on multiple devices.

#8 Documents, Records, and People

The importance of being able to locate your important documents is referenced throughout this article. Note that it is not necessary to collect and put all of these documents in one location. It is generally sufficient to describe where each is currently located (e.g., a copy of my will is stored in the fire-proof lockbox in the guest room closet, my most current letter of instruction is saved to my Google Drive and has been shared with X, and our tax returns are in my home office filing cabinet).

The following is a collection of the different types of documents and records that are referenced above:

Final arrangements: Organ donor card, pre-paid/pre-arranged funeral agreement, burial plot title/agreement, or documentation about body donation.
Estate planning: Last will and testament, trust document, living will/advance healthcare directive, power of attorney (financial, healthcare, other), and personal property memorandum.
Personal records: Birth certificate, adoption records, Social Security card, citizenship/naturalization papers, military and/or discharge papers, marriage license(s) and/or divorce decree(s), and long-term care policy.
Financial records: Written financial plan, tax returns, account statements, checkbooks, safe deposit box key, insurance policies, collections appraisals, agreements/documentation related to business interests, location of crypto wallet, mortgage/loan documentation, and charitable pledges
Property records: Titles, deeds, leases, property tax receipts, closing statements, title insurance, appraisal(s), property survey, home improvements, and property insurances.
Vehicle records: Title, registration, insurance, location of keys, and maintenance records.
Household records: Household inventory, appraisals, appliance warranties and receipts, records related to household employees, and vet records
Devices and accounts: Account usernames, passwords, and device access codes.

It can also be helpful to provide the names and contact information of any professionals who may be helpful in understanding the content of your letter of instruction or administering your estate. This could be your lawyer, CPA/tax preparer, financial advisor, primary care physician, insurance agent, or a general contact email address for your work's HR department.

#9 Letter to Your Loved Ones

Last but not least, a letter of instruction is an opportunity to convey a final message to your family and friends—an expression of love to a surviving spouse, a word of advice to your adult children, or an expression of gratitude for the time you had together.

The Stanford Medicine Letter Project has a letter template to help you review and write what it calls the “seven life review tasks.”

Acknowledge the important people in your life.
Remember treasured moments from your life.
Apologize to those you love if you hurt them.
Forgive those who love you if they have hurt you.
Express your gratitude for all the love and care you have received.
Tell your family and friends how much you love them.
Take a moment to say “goodbye.”

More information here:

My Children’s Inheritance

Choosing a Guardian

I Finished My Letter; What Now?

Print or save a copy of your letter and store it in a safe place. Make sure that you tell at least one close family member or friend where your letter can be found and make sure they have access. Then, schedule on your calendar once a year when to review and make any updates to your letter. This annual update is also a good opportunity to check the beneficiaries listed on your financial accounts and make sure your trusted contacts have access to any shared electronic files.

Finally, take a breath of relief that your loved ones will be prepared in the event that anything should happen to you.

Have you created your own letter of instruction? What other information or guidance did you include that you thought your family might need? Ever had to be an executor? What information do you wish they would have shared with you before they passed? Comment below!

[Editor's Note: Christopher Avery is a practice privacy and data protection attorney living with his family in the northeast. When he's not binging on personal finance content, you are likely to find him leading Cub Scouts on a hike. This article was submitted and approved according to our Guest Post Policy. We have no financial relationship.]

The post Letter of Instruction: How to Share the Critical Details That Are Missing from Your Estate Plan appeared first on The White Coat Investor - Investing & Personal Finance for Doctors.

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By: Lauren O'Brien
Title: Letter of Instruction: How to Share the Critical Details That Are Missing from Your Estate Plan
Sourced From: www.whitecoatinvestor.com/letter-of-instruction-estate-planning/
Published Date: Sat, 18 May 2024 06:30:18 +0000