Planning for the transfer of your assets following death involves more than writing a will or establishing a trust (or both). A will often called the last testament—is a legal document describing how a person's assets will be distributed following their death. Everyone needs a will, but not everyone has the assets to warrant a trust. Those who do have trusts also need wills, which can provide detail about the distribution of personal effects and can also include the grantor’s wishes about certain things.
But what happens if no one knows where the will is or even the password to open the decedent's computer? What if all the critical banking information is safely protected with two-factor authentication known only to the person who just died? In many families, one person typically manages financial affairs. Even assuming that decisions are jointly made, one person is likely to take the lead in execution, and that person controls access to most, if not all, the relevant accounts.
The letter of instruction is the secret code.
One of the vital aspects of a letter of instruction is information about that access. Suppose that Joe has a valid will, several financial accounts, and a trust. Suppose that Joe is married but handles most of the financial administration for the family. The online banking platform responds to his password (or face), and he has automatic payments for bills, deposits, transfers, and more. Joe’s wife is likely entitled to access all the relevant accounts but may have never done so.
If Joe has written a letter of instruction, he will include all the information his partner needs to access and manage the accounts. Examples of the information that would be helpful are:
- Bank accounts with usernames, account numbers, passwords, pins, and dedicated functions.
- Current monthly payments and status (car, insurance, utilities, mortgage)
- Contact information for advisors like attorneys, accountants, and brokers.
- Location of documents, including titles, wills, and tax forms.
The letter includes more than financial information.
A letter of instruction can convey other important information that isn’t appropriate for a will. For example, this letter is an excellent way to communicate a list of people who should be told of your death. It may also be a good way to share your preferences for funeral arrangements if that has not been pre-planned.
A letter of instruction is not a legal document, but you can use one to share preferences like where to donate personal effects or small bequests that are sentimental. In addition, the letter can provide your wishes for taking care of pets that outlive you and suggestions for your executor if there are people in the will who may be difficult to contact. This letter doesn't void anything in the will but can add context.
It's wise to give your executor a physical copy of the letter (safely sealed to protect password security) and keep a copy with other significant estate documents.
This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.
Realized does not provide tax or legal advice. This material is not a substitute for seeking the advice of a qualified professional for your individual situation.
Examples are hypothetical and for illustrative purposes only. Withdrawal strategies should take into account the investment objectives, financial situation and particular needs of the individual.
