When we prepare your estate plan, we try to capture your wishes as thoroughly and precisely as possible. It can be a challenge, though, to cover every variable. You may also have preferences that are hard to capture in the legal language of trusts, wills and powers of attorney. That’s why we encourage clients to prepare a “letter of instruction.”
What is a letter of instruction?
As the name suggests, this document gives directions to anyone who ends up carrying out your wishes. That might be your successor trustee. For those without a trust, it could be the personal representative of your estate. During your life (but while you are incapacitated), it can even include the agent on your power of attorney.
We try very hard to keep documents simple, and in plain English. One challenge: how to be clear, legally precise, and thorough. That’s where the letter of instructions helps out.
You can write a document that speaks in your own voice. It can give general guidance and advice. You might, for example, include any of these things:
- Distribution considerations for any trust you have established
- Investment or management preferences
- Burial instructions or preferred funeral arrangements
- Information about assets and important papers
How do you start?
Just start writing. Grab a piece of paper (or open a computer file) and start with “Letter of Instruction.” Or call it “Guidance for my Family.” It’s OK with us if you title it “Hey, Melinda! Read this!” (assuming, of course, that Melinda is going to be your agent, trustee, and/or personal representative).
Now create a heading. Let’s call it “where to find things.” Now tell your successor where to look for documents, account information, keys, and everything they will need to manage. For example, you might explain where to look for password and login credentials. That might include your password management program, or the trusted custodian of papers.
At the bottom of this document you’re going to put the date and your name or signature. That helps prove that it’s you, and when the information was current. But there are no particular rules about the format or content. Remember, you’re trying to help your daughter, or whomever will be managing your estate.
Now create a second heading. Let’s call it “my preferences for the trust for Jerry” (assuming you have created a trust for someone named Jerry, that is). Tell the trustee why you created the trust, what you hope they will do to help Jerry, and how you expect the trust to improve Jerry’s life.
Just keep doing this until you run out of steam. Date, sign and set the letter of instructions aside. You’re not done, but you do need a break. You can come back to the document and expand on it over the next few weeks or months.
Why not just include this information in your main documents?
There are at least three reasons that the letter of instructions should be a separate document:
- We want it to be your voice, not legalese. Is it important to you that the trustee consider distributing assets in kind, or liquidate your assets to hand out cash instead? Tell them.
- It is directions, not commands. You are explaining yourself and your intentions, but you don’t want to mandate particular actions. Do you have a favorite style of investing, for example? Great. Tell your successor. But putting it here won’t constrain them to only your current investment choices. Times and goals change, and you probably don’t want to compel a particular choice regardless of later circumstances. Most importantly, you don’t want these instructions to be included in communications with financial institutions or trust beneficiaries — unless the trustee chooses to share them.
- It should be flexible and changeable. If you put precise instructions in your will, trust or power of attorney, those instructions are hard to update or tweak. If you have a separate document you can just make the changes, and print out a new version. And, please, date and sign it — just to keep things clear.
OK — but can you at least give me a form?
We can and will give our clients some templates to assist them. In fact, we routinely hand out a document that we call “What My Family Should Know” to does much the same thing.
There are other templates available online. Some of them may focus on financial information, or include end-of-life information. We would love you to include some philosophical background, too. Why did you create a trust? What was in your thinking when you named your second child as agent rather than your oldest? What movie or television clip do you want played at your memorial service, and why?
A special word about “special needs” trusts
The best use of the letter of instruction, we think, is to describe your intentions when you set up a special needs trust for your daughter, son, grandchild — or whomever. You can describe hopes, concerns and expectations. Here — we’ll give you a head start:
Letter of instruction for special needs trust for Jerry:
Jerry is a disabled adult, living with a cognitive disability. While trustor expects that Jerry will always strive toward independence but will likely require at least some assistance with basic living needs, My primary objective is to assist him in his efforts to remain as independent as possible, and to maintain a high level of health and overall well-being. Trustor wishes that Jerry will live as independently as possible in a safe environment, and that the trust will provide the supplementary benefits needed to support Jerry’s living situation to the maximum extent possible without supplanting public benefits. If practicable, the trust should be utilized in a manner that increases the likelihood that Jerry is not forced to live in an institutional setting.
It is important that he not be isolated and that he be assisted to build a fulfilling life, including meaningful social activities and social contacts, leisure and recreation, and travel experiences. Trustee should encourage and support Jerry’s interests, hobbies and choice of entertainment. In no event should Jerry be so constrained by his financial status as a public benefits recipient that he would be unable to enjoy these important life experiences.
You can take it from there. Or come see us about helping you develop your estate plan — and your letter of instruction.