Roadmap To Take This Important Estate Planning Step

You’ve completed all the estate planning documents your lawyer recommended, do you really need to take another step? Yep! A letter of instruction can be an invaluable part of your estate plan. No matter how wealthy you are (or are not yet!) and no matter your family situation, there is vital information that you should organize and communicate to loved ones, heirs, fiduciaries and others. You might write one letter for all these purposes, or break them up into separate letters. For example, you might write a heartfelt letter of instruction to children or other heirs about how you wish their lives to be. Then you might write a separate letter to fiduciaries with detailed financial and other instructions. You might choose to write a separate letter to the trustees of trusts for minors as to how you wish them to handle funds to help achieve the goals you have for them. How you handle this is really what works best for your situation.

Some people might view their letter of instruction as an ethical will. That is a communication to loved ones, and perhaps others, that expresses your beliefs, wishes, wisdom and thoughts. That can be true, but viewing a letter of instruction as only an expression of your life views is too narrow. That is why you might actually create several letters of instruction. One might be a roadmap for a trusteed friend to handle financial and other matters if you have an emergency. Another may be akin to an ethical will left to a child or other people. A third might be to the person serving as health care agent who will make medical decisions for you if you cannot do so. What you do should be based on your needs and wishes.

The following discusses categories you might include in one or all of your letters of instruction. But as with the number of letters, the information covered, and in particular how much you include (e.g., you might indicate bank and financial account information but not amounts). Also, consider whether full account information and passwords should be included in one or more of your letters of instruction. While that information can be really valuable in an emergency you might then choose to restrict who you give the letters to, and you probably should password protect them and email them only by encrypted email.

While providing a sample form might seem easier, with a modicum of effort the checklist following will hopefully give you guidelines to create the letters of instruction that will really fit your life situation. That will likely be better than your just modifying a generic form.

ICE – In Case of Emergency

A key purpose of a letter of instruction is to tell someone (e.g., the agent under your power of attorney for financial matters and the agent under your health proxy for medical decision making) what your wishes are and some of the key information you need. If the same people serve both financial and health matters you might do one letter, if not consider creating separate letters for each purpose.

For both your financial and health care ICE letters you should indicate where original legal documents can be found. This might be in a safe deposit box, but that might be a mistake if the agents under your power of attorney and health care proxy are not authorized signers on the safe deposit box. You might opt to have given originals to each agent in advance. You should indicate who the attorney is that drafted the documents so if the agents have questions they have the contact information as to who to call.

ICE – In Case of Financial Emergency

For your financial ICE letter, you should indicate where key financial data is maintained and how to access it. What bills will have to be paid and how can they determine that information? If you use a computer-based bookkeeping/check payment system you might explain what you use, which device it is on, and how they can get help if they are not familiar with it. If you use a manual check register explain where you keep paper checks and the check register. Even if you don’t disclose all financial information (you may not need to) set forth the practical information necessary to get important bills paid.

ICE – In Case of Health Care Emergency

For your health care ICE letter, you should provide some key health information, indicate where health records are maintained (e.g., on a laptop, in a file or loose-leaf binder in your home, etc.). Contact information for key medical professionals should be listed, e.g., your internist or primary care physician, specialists, if you have a particular health challenge, etc. Health insurance information should also be provided. Where can your health care agent find your health insurance and drug cards or at least the information on them? What types of health care decisions do you want made? Are their religious considerations that might affect health care decisions? What end of life decisions do you want?

Key Family, Advisers and Other People

It can be important to indicate who key people are relevant to your plan. This will differ from person to person, but assembling such a list may prove enlightening for you as you may for the first time realize how many different roles and positions are involved. Having a list of positions, names and contact information may be helpful for everyone to see so that they know if certain actions they might have to take may in fact be in the purview of someone else. The listing should be by categories that make sense for you. Some of the positions/relationships you might list are indicated below:

· Professional Advisers: estate planning attorney, CPA, life/disability insurance consultant, property casualty and liability insurance consultant, banker, trust officer, business/corporate attorney, etc.

· Family: parents, siblings, spouse/partner, children, others. How far the information should expand beyond you may depend on the role family plays in your plan, who serves as fiduciaries, how large the family is (for a small family you might want to indicate further relationships), etc.

· Agents, Fiduciaries, Positions: trustees of trusts, executor (Personal representative under your will), financial agent under your power of attorney, agents under your health care proxy, funeral agent if you signed such an appointment, representative for receipt of social security benefits, anyone who has access to your safety deposit box, the person designated as long term care insurance lapse designee, successor “owner” under 529 accounts you created, persons appointed to act as your financial or personal guardian or conservator, persons appointed to act as your financial or personal guardian for a minor or developmentally disabled adult child, co- or joint owners on bank and financial accounts, etc.

Key Passwords, Web/Cyber Information

Most of our lives tend to be online (even for those of us who cling to paper). So, organizing and documenting account information, passwords, and other critical data for credit cards, bank and other financial accounts, utility companies, vendors, etc. is vital for those you will rely on in the event of illness, death or other emergencies to have. You might use a password organizer or password vault. If so, the information about that service and the password to access it may be vital to communicate to key people. If not, you need to create and maintain a current list of account information, websites, passwords, etc. Be certain to take safeguards such as password protecting any document you create and only sending it via secure or encrypted email.

Key Financial Information

This has been mentioned above in the context of the information you might provide to certain key people, such as the financial agent under your durable power of attorney, or the successor trustee under your revocable trust. However, in that context you might only be provided with limited information that would be necessary for that person to figure out how to pay bills during an illness or emergency. If that is the case, you might benefit from creating a comprehensive list of all your financial information which is why this is noted as a separate categories to consider here. Information that you might consider organizing and documenting could include:

· Credit cards: Card, how your name appears on the card, contact information for the card (address of record, phone number of record, etc.), account number, expiration date, code on the front or back of the card, phone number for customer service (e.g., to report a lost card), etc.

· Bank and Financial Accounts: Type of account, name of institution, name of broker/banker if any and his or her direct contact information, account number, password, and other pertinent information.

· Budget: Providing a budget may be helpful to guide someone as to bills to pay, deposits to make and other information in an emergency. For more long-term planning it may be helpful for you or a key person to evaluate your financial status.

· Balance Sheet/Cash Flow or Income Statement: You might choose to include complete financial records.

· Debts/Loans: Include the name of the lender, account number, how payments are made (regular mail, ACH, on auto pay, etc.). The amount of the payments and when due. Include home mortgages, credit card balances, etc. Indicate any immediate actions your agent or other responsible person should take in an emergency. Note that if this information was already set forth in the emergency information or ICE above you may not need to repeat it here unless this data is being provided in a separate letter.

· Real Estate and Private Equity: If you own interests in real estate rental properties, private businesses, etc. provide key information here.

Key Personal Information

There may be important personal information that you should communicate to those who you rely on. This might include drivers license number (state, expiration, etc.), passport (your name as it appears on the passport, country of issuance, passport number, expiration), Social Security Number, birth certificate information (date of birth, location of birth, certificate date and number), marriage certificate (name of spouse, date of marriage, marriage certificate number and issue), etc. As cautioned above, this information could be dangerous if hacked so exercise caution.

Key Insurance Information

Insurance is a vital part of handling many types of emergencies, and is critical to long term financial, estate and other planning. Be certain to document key information on all types of policies. For each policy you might indicate: type of insurance, insurance carrier/company, policy number, insured name (yours and/or others), premium, due date of premium, where to and how to pay premium, emergency phone number, agent name and contact information, etc. Do this for each type of coverage: property, casualty, liability, excess or umbrella liability, disability, long-term care, life, vehicle coverage (automobile, boat, motorcycle, recreation vehicle coverage), homeowners, business coverages, etc.

Key Legal Documents

List each key legal document such as those noted below. Indicate: type of document, name of document, date of document, where original of document is located, where a copy can be obtained, if the document appoints an agent or other person that person’s name and contact information and the role or title provided. Key documents might include: financial power of attorney, health care proxy, living will, HIPAA release, Physician Order for Life Sustaining Treatment (“POLST”), will, revocable trust, insurance trust, other irrevocable trusts, beneficairy designations.

Non-Binding Indications or Planning Goals

This is an important part of many letters of instruction, and the first and most common matter many people think about. This is personal instructions to those you love, or to fiduciaries (e.g., those serving as trustee of trusts) as to what your wishes are. In the ICE emergency comments above you may have already communicated health care, medical and end of life decisions to those charged with medical decision making. So here you may focus on wishes for how your wealth should be used to care for you in the event of your aging, illness or incapacity. If you create trusts for heirs, especially minors, you might indicate your wishes as to their care and upbringing, how money should be spent for their lifestyle and needs, and other personal wishes. One client referred to this as the “two tissue box letter.” It may be painful and sorrowful to imagine how children or other loved ones should be cared for if you become incapacitated or die, it can be very important to protect your wishes and help those you love. Many personal wishes just don’t belong in formal legal documents so your letter of instruction may be the ideal place, perhaps the only place, to communicate your personal wishes. Also, relegating these types of instructions to a letter, although non-binding, may have advantages in that you can update them with no legal costs as your children or other loved ones grow and mature. Another consideration is that it is common to use professional or institutional trustees instead of family member trustees. An institutional trustee likely will not have the personal familiarity with a child or other beneficiary that a family member trustee will. Providing a letter of instruction about wishes for education, entertainment, travel, lifestyle, etc. may be very helpful to the trust officer handling the account.

If you have been charitably inclined and have provided any discretion to agents, trustees or others to make charitable contributions on your behalf you may wish to provide direction as to the amounts, purposes and charities they should favor.

Personal, Religious or Philosophical Wishes and Thoughts

Your letter of instruction might include statements of your life view. This should be done from whatever religious, non-religious, philosophical or other perspectives you hold. If your views may provide guidance to instruct family, loved ones, heirs, fiduciaries and others, you should provide that information. Too often people assume “they know.” But often “they” don’t know and even if they do, in times of emotional distress it can be incredibly helpful to see what your feelings or beliefs were in writing. As noted above, institutional trustees may not have the personal knowledge of your wishes. Obvious needs for this information are for your health care agents to understand clearly what religious beliefs you do, or do not hold, as that may have a direct impact on the medical decisions they make for you if you are so ill as to not be able to make those decisions. Perhaps historically it may have been reasonable to assume that whatever faith someone was raised with they still hold, but that is not assuredly true. Also, if you have minor children do you wish them raised in a particular faith tradition? That might inform a trustee of the need to pay for private religious school education, etc. You might choose to explain your beliefs and feelings about wealth and what should, or should not, be done.

Special Circumstances of A Beneficairy

If any loved one has a particular challenge, you should describe that challenge and provide guidance that family who may not have that information, trustees, and perhaps others may need. If a child or other beneficiary has special needs, describing the child’s status and care could be valuable. If a loved one, family member or beneficiary has an addiction, drug, alcohol, gambling, shoplifting, etc. discussing that challenge and providing the guidance you can be critical to helping that person if you are no longer able to do so.

Conclusion

One or more letters of instruction may be critical to accomplishing your real estate and personal planning goals. Even with the best of legal documents and other planning steps in place, your personal communication of your wishes, beliefs, recommendations and more may provide that human and personal color to these vital matters and hence valuable guidance to those who will try to help.