So you’ve got some nifty estate planning documents?
You are awesome.
Formal estate planning document can ensure your family is cared for after your death, avoid court, and minimize the burden your loved ones will face when you are gone.
But legal documents are only one part of the equation.
Your estate plan is not complete just because you signed some fancy papers.
Because while formal estate planning documents can avoid legal obstacles after your death, they do not eliminate the myriad other tasks necessary to settle your affairs.
Think of it this way:
If you died today, would your family know what to do?
If they couldn’t remember anything you told them about your estate, would they be able to easily find all the information they need?
Read more: Why You Need to Have an Estate Planning Fire Drill
If you answered “no” to either of those questions, then your estate plan is not complete.
To make things easier on your loved ones after your death, the best thing you can do is create an estate planning letter of instruction.
What is an Estate Planning Letter of Instruction?
An estate planning letter of instruction is a document you write to help guide your family or other representatives through the process of settling your affairs.
Take a moment to think about what would need to be done to manage your estate:
Organizing your finances, settling your debts, disposing of your assets, downloading online pictures and documents, canceling services and subscriptions, filing insurance claims, contacting advisors, closing accounts, etc.
The list quickly adds up, even for “simple” estates. (Author’s note: I have yet to see a “simple” estate, which is why I used sarcastic quotation marks.)
None of your estate planning documents explain how to do those things.
Related post: Estate Planning Basics You Need to Know
Sure, your family might be able to figure out what to do and how to do it.
But they will also likely be experiencing a great deal of stress and grief.
Do you really want to add to those troubles and force them to dig through a lifetime’s worth of documents to find the hundreds of pieces of information they will need?
Of course not.
Now, imagine that after you pass away you could stand over your family’s shoulders and tell them — step by step — exactly what to do to settle your affairs.
Even though you are no longer here, you are still helping your family.
That is how you should think of an estate planning letter of instruction.
How Do You Write a Letter of Instruction?
One of the best parts of an estate planning letter of instruction is that, since it is not a formal legal document, you can write it yourself.
And what better time to write a letter than while you’re stuck at home?!
Related post: 7 Estate Planning Tips for Quarantine
However, it is important to remember that because a letter of instruction is not a formal legal document, it is not enforceable.
If you want your wishes to be carried out, put them in your will or trust.
That said, there is no right or wrong way to prepare your letter of instruction.
It doesn’t even need to be a letter. You can include spreadsheets or notes or videos or any other sort of permanent record that can be used after your death.
It is entirely up to you.
But to best assist your family or representative in settling your affairs, a great letter of instruction should cover at least three main topics:
1. How to Manage Your Finances
A lot of people believe their finances are simple.
However, think about all the information your representative would need to know to effectively manage your finances after your death.
For instance, what are your regularly recurring bills or subscriptions?
You might have: electric, water, natural gas, cable, Internet, mortgage, home insurance, car payment, Netflix subscription, lawn service, pest control, newspaper subscription, etc.
There could be many important pieces of information associated with each bill:
What is your account number and/or Personal Identification Number (PIN)?
Is the bill on Auto Pay? If so, what bank account or credit card pays it?
How can this account be accessed online (e.g., website, username, password, and answers to security questions)?
When is this bill generally due each month?
Should this account be closed after your death? If so, what does your representative need to do to close it? Who should they contact?
Did you provide a deposit (e.g., for a utility)? If so, how can that be retrieved?
As part of your letter of instruction, describe each expense (“OG&E - home electric”) and provide all the information your representative might need for that account.
The easiest way to get this information is to contact the service provider directly.
Write down phone numbers, addresses, and anything else that may be helpful.
That way your family won’t have to spend days trying to figure out who they need to contact and what they need to do — because you have already done the work for them.
Use the same process outlined above for every other aspect of your finances.
By the time you are done, this part of your letter of instruction should read tell your representative how to handle everything from funeral expenses to utilities to taxes.
Related post: IRS Increases 2020 Estate Tax Exemption
However, that only covers your personal finances.
What if you also own a business?
This is one of the aspects of estate planning that most people overlook. Because your business won’t just disappear when you die.
Expenses may need to be paid, payroll disbursed, accounts closed, etc.
What information would be needed to do all those things?
Even if your family is familiar with your business, they are probably not so knowledgeable that they know everything they will need to do after your death.
You should therefore leave instructions to help them with that process.
This type of information is often created as part of a succession plan.
If you take nothing else from this post (although you should take at least something else), remember to make a succession plan if you own a business.
Related post: Estate Planning for Entrepreneurs
You family will already be dealing with the grief of losing you.
Don’t add to their stress by making them figure out your business. Leave a detailed succession plan, either as part of your letter of instruction or as a separate document.
2. How to Collect and Dispose of Your Assets
One of the first steps in settling any estate is to inventory the assets.
It’s much easier for you to take care of that now than for someone else to do it later. After all, you know better than anyone what assets you have.
Use your letter of instruction to list your significant assets, such as:
Real estate (including mineral or royalty interests)
Bank accounts (checking, savings, CDs)
Motor vehicles
Retirement accounts
Insurance policies
Brokerage accounts and other investments (including bonds)
Health Savings Accounts
529 College Savings Plans
Patents, copyrights, trademarks, and other intellectual property
Be as specific as possible when describing your assets.
For example, when listing your bank accounts you should also list the name of the bank or credit union, the account number, PIN number, the type of account, etc.
Next, after listing your assets, including information about how to access them.
Some assets may need to be claimed or otherwise obtained through action by your representative or by a beneficiary (e.g., life insurance benefits).
Your letter should answer important questions about your assets:
Who is listed as a beneficiary on your retirement account? What will that person need to do after your death? What number should they call? What information will they need?
How can your family claim life insurance benefits? Where do you have life insurance policies?
What is the combination to your safe? Do you have a safe deposit box or storage unit? If so, how can your family access it? Where is the key or access card?
Where are your title documents, such as your car title, the deed to your house, stock certificates, etc.?
Include the name and contact information of your advisors who have information about your assets, such as your attorney, accountant, financial advisor, and insurance agent.
Also explain why your representative should contact each advisor.
What assets can each advisor assist with? What work have they done for you? What guidance or information might they be able to offer your representative?
This information is incredibly helpful.
It gives your representative someplace to start.
Aside from financial assets (which is what most people focus on), there is another asset category that often gets forgotten in estate planning:
Your digital assets.
Related post: Estate Planning in the Digital Age
A digital asset is essentially any information you create that exists in digital form, either online or on an electronic storage device.
Take a moment to think about all of the online accounts you have.
Is it more than you can even remember? Yeah, me too.
All those accounts are digital assets. So are online stock accounts, social media profiles, credit card dashboards, shared photos/videos, digital wallets, websites, etc.
You could easily use several dozen online accounts without even thinking about it.
Digital assets can be very difficult for your representative to access after your death unless you include the necessary information in your letter of instruction.
Related post: 5 Tips to Create Your Digital Estate Plan
Let your representative know your login info, passwords, and security answers, and what to do with each account (e.g., delete your Facebook, or leave it as a memorial).
At the very least, leave a list of every online account you use regularly.
3. How to Fulfill Your Personal Wishes
Estate planning is not just about assets and legal issues.
Most people have after-death wishes that are not (and generally should not be) included in their formal estate planning documents.
You may have preferences on questions such as:
Do you want to be buried or cremated?
Where would you like your funeral held? And is there a particular program (religious or otherwise) that you would like used at your funeral?
Do you want your ashes to be spread somewhere?
What family members or friends should be contacted (including name, phone number, email, or other contact information)?
Have you prepared an obituary that you would like your family to use?
Is there a particular place you want to be buried? or is there anything you would like to be buried with?
Unless you voice your wishes, how can your representative honor them?
This is particularly important if you have prepaid for funeral services or a cemetery plot or other materials or services that your family would otherwise have to pay.
If no one knows you already paid for something, then that money goes to waste.
Consider including this information with your letter of instruction, along with any receipts, phone numbers, etc., your representative might need to follow your wishes.
A letter of instruction is always a great way to transfer wisdom.
An old African proverb says, “When an old man dies, a library burns to the ground.”
People often focus so much on transferring financial assets that they forget to think about the intangible things they would want to pass on to their loved ones.
What values, beliefs, stories, and traditions do you want to leave behind?
Do you have a journal that you want your family to have?
Is there anything you want anyone to know about you?
If you do not write down that information — either in your letter of instruction or in a separate letter — those things may be lost forever.
Estate planning is about more than transferring your assets.
It is about passing on your legacy, both tangible and intangible.
By writing an estate planning letter of instruction, you can provide tremendous value to your representative while also leaving an invaluable gift to your loved ones.
Talk to an Attorney About Your Estate Plan.
Estate planning documents are excellent tools to provide for your family; however, those documents don’t have all the information needed to settle your affairs. Make things easy on your loved ones by creating an estate planning letter of instruction.
To discuss other aspects of your estate plan and how you can take care of your loved ones after your death, contact the Oklahoma City estate planning attorneys at Postic & Bates for a free, no-obligation consultation appointment.
David M. Postic is an attorney at Postic & Bates, P.C. His practice focuses on estate planning, probate, real estate, trust administration, business planning, and adoption.
You can email David through our Contact Us page or by calling our office at (405) 691-5080.
[As with all our blog posts and other publications and resources, the contents of this article do not constitute legal advice and are subject to our site-wide disclaimer.]
