Estate Planning and Business Planning - Letter of Instructions

Estate Planning / Business Planning / Improve The Odds

Some Thoughts Regarding The Preparation of a Letter of Instruction

An oft-overlooked part of the overall estate planning process is the preparation of a letter of instructions, the purpose of which is to give your family and/or your personal representative timely, private and useful information and advice concerning the administration of your estate and related matters.

Such a letter is certain to ease the task of adjusting to the changes which your death will bring, and those who come after you will be thankful for your thoughtfulness and foresight in preparing it.

While any such letter is necessarily unique, and no "blueprint" can be completely relied upon, this memorandum is intended to give you some guidance as to what such a letter of instructions might usefully contain.

You should consider, prior to beginning such a letter, who is to receive it or otherwise have access to it, as that fact may well influence its contents, especially, if sensitive information is to be included. As an alternative, it might be preferable to prepare two different letters, one to your family generally and the other to your personal representative alone.

The length and complexity of any such letter will depend on the circumstances; it might be as brief as two or three handwritten pages or, in an extraordinary case, as long as twenty or thirty typewritten. It should periodically be updated, probably every other year at a minimum, and certainly whenever significant changes occur.

Here is a description of some of the subjects which you might wish to address in such a letter. They are arranged in three sections; Section One deals with information that will be of use and interest immediately after your death, Sections Two and Three deal with intermediate and longer-term concerns, respectively.

Section One - Immediate Concerns

1.1 Organ Donations. If you have made organ or tissue donations, identify the recipient organizations and provide a telephone number so that the necessary post-mortem medical processes can be performed promptly and effectively.

In this connection, you should also consider notifying your primary care physician and asking him to place evidence of such intended donations in your medical record.

1.2 Autopsy. If you have significant personal preferences on the subject of autopsy, you should state them, together with the reasons therefor, so that those preferences will be known and considered.

1.3 Funeral & Burial. Describe your wishes regarding funeral and burial (or cremation, as the case may be). Attach a list of the names, addresses and telephone numbers of people and organizations who should be notified upon your death.

Specify your place of burial, and whether your lot or crypt and/or grave marker have been purchased and paid for. Identify the people who you wish to serve as pallbearers or in any other official or honorary capacity, the name of the funeral director, type of casket and grave marker, and other relevant details.

If you are to be cremated, specify the manner of disposition of your ashes. Consider specifying a particular charity or other recipient for memorial gifts, if any are made.

1.4 Obituary. The preparation of an obituary will be a difficult task in the relatively short time available, and you might want to set down a list of points to be touched upon by the writer, or perhaps, depending on circumstances, to prepare an actual draft of the obituary yourself.

1.5 Genealogy. You might wish to provide a brief genealogical sketch, identifying such of your antecedents, by date and place of birth and death, and other facts if known, as you can conveniently do, so that this information will be preserved.

You should also cause the memo to reflect your own correct name, any other names by which you have ever been known, and your own date and place of birth.

Section Two - Intermediate Term Matters

2.1 Original Documents. You should generally identify the documents which will govern the administration of your estate (e.g. Will, Trust Agreement, etc.), and set forth the location of the originals of those documents.

It would also be well to identify the persons or institutions named as personal representatives and/or as trustees, so they can be contacted promptly.

2.2 Government Benefits. You should identify the government benefits for which various members of your family are or may become eligible (such as social security, medicare, medicaid, military benefits, etc.) and, if possible, furnish names and telephone numbers of contact persons in appropriate government agencies.

Consider acquiring and attaching to the letter a statement of your social security benefits, which is available from the Social Security Administration upon request.

2.3 Advisors. Identify all of the persons upon whom you rely for business or personal advice, including your attorney, accountant, banker, insurance agent(s), securities broker(s), clergyman, etc. Show their full names, complete mailing addresses and any telephone numbers at which they can be reached.

2.4 Insurance. Describe in detail all of your insurance coverage (life, health, liability and casualty) giving names of companies, policy numbers, effective dates of policy, levels of coverage, and the name, address and telephone number of your agent or other contact person.

2.5 Employment Benefits. If your estate or members of your family will become recipients of employment benefits (pension plans, profit sharing plans, deferred compensation plans, salary continuation plans, etc.) you should describe the amount of the benefit, the manner in which it is to be paid, and identify a contact person, usually someone in the employer's personnel or employee benefits department, who is familiar with your situation and can answer specific questions from your family and/or personal representative.

2.6 Domestic Employees. If you have domestic employees, you might wish to make some suggestions about their continued employment or, if that is not appropriate, about severance arrangements and/or other methods of easing their transition to other employment.

2.7 Unusual Dispositions. If you have made any unusual provisions regarding the disposition of your estate, such as unequal treatment of people who are in an equal degree of relationship to you, you might consider commenting on your reasons, bearing in mind, however, that such comments can be a two-edged sword, and a disappointed heir might try and use such comments as a basis for challenging the validity of your Will or as a lever to secure some other form of redress.

Extreme caution, and suitable professional advice, is indicated here.

2.8 Prior Marriage/Adoption. If you have had a prior marriage which terminated other than by death of your spouse, make reference to any continuing obligations which you may have either to the former spouse or children of that marriage.

If there have been any adoptions into or out of your family, you should make reference to them and describe the present legal status of the person(s) so adopted.

2.9 Charitable Pledges. If you have made any charitable pledges which are to be paid over a period of time, make reference to those pledges and indicate how you wish any remaining balance paid subsequent to your death.

2.10 Safe Deposit. If you have a safe-deposit box or boxes or other secure storage facilities, identify the location and number of each such box or facility, who has access thereto besides yourself (and whether as a co-renter or as a deputy) and describe the customary location of your key.

Section Three - Longer Term Issues

3.1 Prepare Inventory. Set down an inventory of all of your significant assets and liabilities, both those held individually and those which are held jointly with your spouse or others. Segregate the individually owned items from those which are owned jointly.

In each instance, the memorandum should describe the type of asset, its approximate value, its location, its ownership, and any peculiar characteristics, and, with regard to liabilities, should specify the terms thereof and any security for repayment. With regard to amounts owed to you by others, you should identify the debtor, the amount, what evidence there is of the indebtedness, and any security which you hold for repayment.

3.2 Bailed Assets. If you are in possession of personal property owned by someone else, or if someone else is in possession of personal property owned by you, you should specify the asset with enough precision to permit its identification, and, in the case of assets of yours which others are holding, secure a written acknowledgement that the item is owned by you and will be returned promptly upon request from you or your estate.

3.3 Your Residence. Consider describing any idiosyncrasies about your residence, and furnish a list of persons who are knowledgeable about the furnace, the plumbing, the electrical system, the appliances, etc.

You might also want to prepare a memorandum regarding the routine operation of the heating and air conditioning systems, water supply and disposal systems, appliances, and so forth. If you have been the "fix-it" person in the family someone is bound to thank you for this particular thoughtfulness.

3.4 Pets/Memorabilia. If you do not have any close family members, you may wish to leave instructions regarding the disposition of any pets you may own, and/or family memorabilia (photographs, letters, etc.) which do not have any intrinsic value.

3.5 Your Child(ren). If you have a minor child, or an incapacitated adult dependent, you might wish to make suggestions regarding the continuing care of that child or dependent.

In this regard, consider discussing, in a memorandum directed to the child's prospective guardian, your specific goals and aspirations for each child, perhaps covering the areas of education, social and cultural activities, sports and recreation, religious training, career objectives and so forth.

As a precaution, you should also contact any person whom you are mentioning in this connection, to determine his or her availability and willingness to assume such responsibilities.

3.6 Fiduciary Duties. If you are serving as a fiduciary (personal representative, trustee, guardian, custodian, attorney-in-fact, etc.) for any other person you should so note, and furnish the name of the person(s) to be contacted to take over your duties.

You should also describe the location of your files and records relating to these positions, and make sure that each of those files contains full, complete, and orderly records of the fiduciary estate. The prompt and successful transition to your successor fiduciary will help relieve your estate of continuing liability.

3.7 Business Interests. If you have a substantial interest in a closely held business, whether operated as a proprietorship, partnership, limited liability company or corporation, the successful sale or liquidation (or continuation, as the case may be) of that business may depend absolutely on your providing post-mortem guidance, through a memorandum, to your successor management and your personal representative.

Unless you have highly qualified backup management already in place, your personal representative will have the difficult task of attempting to manage an ongoing business without the body of knowledge that you have accumulated, perhaps over a working lifetime, and the loss of that knowledge is apt to prove an insurmountable difficulty.

Accordingly, if you have such a business interest, you should prepare a separate confidential memorandum describing the business, its competitive position, its strengths and weaknesses, its capital requirements and how they have been met, its personnel (including discreet remarks about strengths and weaknesses of specific key people), your observations as to whether the business should be retained by your estate, sold (and if so some likely candidates for purchase), or liquidated, and some realistic guidance as to how much your estate could reasonably expect to receive in the event of any sale or liquidation.

3.8 Intellectual Property. If you are an inventor or author, you should set down relevant information regarding any patents, trademarks and/or copyrights which you hold, and the name of your legal counsel familiar with those matters.

3.9 Professional Practice. If you have a professional practice, describe the steps which should be taken to close it down, identifying any other practitioner who you would like to have serve as custodian of any remaining files or records.

Identify all professional and other organizations which should be notified of your death, and furnish appropriate instructions regarding the surrender of any professional licenses.

3.10 Gift Programs. If you have been engaged in a gift program during your lifetime, you might wish to make suggestions to your surviving spouse regarding an ongoing gift program by such spouse.

3.11 Litigation. If you are involved in litigation which may not have been concluded by the time of your death, you might wish to set down your thoughts regarding such litigation, identifying all persons who would have any knowledge which might be useful in the prosecution or defense of the matter.

3.12 Exotic Assets. If you own any "exotic" assets, such as fine arts, collectables, etc., which are to be disposed of during the administration of your estate, you should make suggestions to your personal representative about the manner of disposition, suitable appraisers, likely buyers, specific peculiarities of the marketplace in such items, and perhaps some indication of present value.

If you are a collector, it is almost certain that you know vastly more about the subject than your personal representative will, and any knowledge you can impart in this fashion is apt to be helpful.

Postscript - December, 2002 The aforegoing article was written several years ago when the writer was in good health. Conditions are now otherwise, and I can tell you that preparing a Letter of Instructions under the Reaper's watchful eye adds considerably to the general stress and strain. It remains to be seen whether my "wonderfully concentrated mind" will be equal to the task.

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Law Offices of Thomas J. Keating IV
Centreville, Maryland, USA

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