Wednesday, June 1, 2011

The Estate Planning Letter of Final Instruction

The ‘Missing Link’ Estate Planning Document

Most of us are aware of the importance of an effective estate plan, which would primarily include a Will, a Durable Power of Attorney for Financial Powers, and A Durable Power of Attorney for Health Care. In many cases this may also include a Revocable Living Trust, funded with assets during the life of the Grantor. These documents are crucial to providing legal guidance to the administration of an estate or trust. However, the creation of effective documents does not guarantee a smooth estate transition. Some of the information family members would need to finalize an estate is not contained within those formal legal documents. The missing link to the plan is a statement by the Testator (you) to expedite and smooth the process. This is usually called a ‘Testamentary Letter’ or a ‘Letter of Final Instruction’. It may cover a variety of topics, ranging from burial instructions to listings of assets and advisors.

A Testamentary Letter is not legally binding: that’s why you have your formal documents. The letter’s purpose is to provide your family with guidance. Specifically, it is intended to answer the important questions of who, what, why, how, and where. We have created a Testamentary Letter (click here) that you can use for yourself or give to your loved ones. If you prefer to compose your own letter, provided below are some guidelines.

Style: A testamentary letter is just that: a letter, and not a legally binding document. As such, there are no formalities to the letter itself. It may be handwritten, typed, or generated on a computer. The letter is ‘precatory’ which means that it expresses your intent, but is nonbinding. Any binding instructions should be put in your Will or Trust. When creating the Testamentary Letter, obviously be aware that your administrator or family must know it exists and where it is located. I remember early in my legal career working on and probating the estate of an elderly woman. We went through a house of accumulated treasures and trash, found several things of value, discarded several thousand pounds of junk. Many months later, one of the heirs called with a question about a bill on a safe deposit box. We re-opened the estate, had the box opened and found a letter of her desires (including burial instructions that weren’t followed, a service that wasn’t performed and some gifts that hadn’t been made). Be sure to tell more than one person about the letter and where it is located. Also indicate that ‘if anything happens’ (my favorite euphemism for ‘when I croak’), they should get the letter first before doing other things.

Introduction: The introduction of the letter is up to you. You can address it ‘to whom it may concern’, to loved ones, or your personal representative whatever works for you. You should have a date on the letter, either in the signature or the heading. In addition, you should have a statement that this is a testamentary letter: ‘I’m writing this to provide some guidance and information to you upon my death. I hope you are able to carry out these wishes.’

Who: Logically there are a variety of people who should be contacted, so the names, addresses, phone numbers and e-mail addresses of those people should be provided in your letter. Examples of who you should include are friends, family members and important advisors.

What: This part answers ‘what do you want done with ?’ Here you should elaborate your desires with regard to things such as Funeral/burial instructions and preferences, anatomical gifts (although you should make an organ donation through the organ bank as well), and the disposition of specific personal property or memorabilia (supplemented if possible with a digital photo or other identification).

Where (Valuable Papers): It is also important to list the location of valuable papers such as your Will, original Social Security card, and deeds to your property.

Where (Financial Items): Your family will also need information regarding your monetary assets. You should give them access to the location of things such as IRAs, retirement accounts, safe deposit keys, and brokerage accounts.

How: How do you want the estate administered? Remember your formal legal documents override your letter, so if you want something very specific, you should have it in your Trust or Will. However, if you have stated certain desires in your Trust or Will about ‘sprinkling’ money to children or grandchildren, or you have a concern you want expressed, the letter will help communicate your wishes.

Why: Why are certain things the way they are in your estate plan, if you care to explain these decisions. (If you don’t care to explain them, you’ll never hear about it anyway).

For your own personal use, or to pass onto friends or family members click here for our Testamentary Letter.

Leon C. LaBrecque, JD, CPA, CFP®, CFA