Investor Education | Is your estate-plan letter perfect?

A will is an essential part of a comprehensive plan.  But a will won’t do much good if it cannot be found or if the terms are confusing.  To avoid potential family squabbles, you may want to draft a “letter of instructions” to accompany the will.

This is an informal letter giving your heirs information concerning estate matters.  It does not carry the same legal weight as a will, it is important nonetheless.  For instance, the letter may specify requests that should be carried out upon death.  Copies of the letter should be attached to the original will.  In addition, keep another copy in an accessible location known to family members, so it will be easy to find in times of emotional distress.

What should be included?  A letter of instructions may cover a variety of issues, but here are four key areas to focus on:

  1. Explanation of assets:  The letter may provide a detailed inventory of assets, especially those likely to be overlooked when the estate is settled.  This can include checking and savings accounts (with records of passbooks and their locations); safe-deposit boxes and their contents; business insurance and accident insurance; retirement plans; Social Security and VA benefits; stocks, bonds and other investments (including the names of brokers and account numbers); information on real estate holdings; and mortgages and mortgage insurance as well as life insurance policies.  Include the insurance company’s name, your policy number, the name of the agent handling the policy and any relevant papers.
  2. Location of documents:  Besides those assets already accounted for, you should also list all your important personal and financial papers.  This may prove helpful in settling your affairs. For example, you should disclose the whereabouts of your past federal and state tax returns and the records required for this year’s returns.  Don’t forget to list all debts, credit cards and other accounts that may need to be paid off, canceled or transferred to your spouse’s name.
  3. Miscellaneous instructions:  Other items of a personal nature may be included in a letter of instructions.  These items may include funeral, burial or cremation arrangements; fees that have been paid and cemetery plots selected; names, addresses and telephone numbers of people and organizations to be notified upon death; and other specific instructions for handling personal affairs.
  4. Other personal information:  You may want to state personal preferences and desires in the letter (e.g., your wishes concerning the education of your children).  Finally, you may explain the amounts that the heirs can expect to receive as inheritances and the reasons for the distributions.

Remember that a letter of instructions is not a legally binding document.  As a result, it should not be viewed as a replacement for a will, but it can still provide valuable guidance to the family.

This newsletter/advertisement is produced for our clients, friends and associates through an arrangement with WPI Communications, Inc. for the representatives’ use. Although the editorial content is professionally researched, written and edited, neither our firm nor any of its agents, representatives or associates make any representations regarding the accuracy of the content or its applicability to your situation. The information in this communication is not intended as tax or legal advice. In accordance with IRS Circular 230, the information provided herein may not be relied on for purposes of avoiding any federal tax penalties. Any tax advice contained in the body of this material was not intended or written to be used, and cannot be used, by the recipient for the purpose of 1) avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions, or 2) promoting, marketing or recommending to another party any transaction or matter addressed herein. You are encouraged to seek tax or legal advice from an independent advisor.

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