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  • Writer's pictureNestor Vargas

Letter of Instruction in 2024: A Step-by-Step Guide

Updated: Mar 10

A letter of instruction continues to grow in significance in today's world, where personal and financial affairs are increasingly complex. This document, often overlooked, plays a crucial role in estate planning and personal legacy.


Letter of Instruction: A step-by-step Guide

This article explains what a letter of instruction is, why it’s important, and offers a step-by-step guide on how to create one.


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What Is a Letter of Instruction?


A letter of instruction is a non-legal document where you express your final wishes in clear language. It differs from a legally binding will, as it helps clarify decisions in your will, outlines your funeral preferences, details the location of your assets, and offers comforting parting words to your loved ones.


While understanding what a letter of instruction entails is vital, it’s equally important to recognize why it’s becoming an indispensable part of modern estate planning. 



Why Should I Care About a Letter of Instruction?


Many individuals prepare estate planning documents yet often forget to discuss them with their families. This oversight can lead to family conflicts following the passing of a loved one. 


Even more concerning is that many people lack any form of estate planning, leaving their families to speculate about their assets and final wishes. By creating a letter of instruction, individuals can ensure better care for their loved ones after their passing and help prevent familial conflicts.


Understanding its importance, you may wonder if such a letter is a legal necessity. 


Do I Need a Letter of Instruction?


Legally speaking, you do not need a letter of instruction, but it is beneficial because it acts as a clear guide. It explains what you want in easy-to-understand words, helping your family avoid confusion when settling your estate. In today’s complex world, clarity is key, so a letter of instruction provides invaluable guidance for your loved ones.


To clearly understand what a letter of instruction is and its purpose, let’s see how it differs from the traditional legally binding will.


How Is A Letter Of Instruction Different from a will

How to Write a Letter of Instruction


There is no standard format for writing a letter of instruction because it is not a legally binding document. Remember that the letter of instruction is like the legend on a map, aiding interpretation without altering the course. Its personal nature means you can tailor it to suit your specific needs and situation. 


To help you get started, I’ve created a 5-step final wishes framework :


1) Select Contents for Your Letter of Instruction 

2) Arrange Your Information

3) Begin Drafting

4) Plan the Storage of Your Letter of Instruction

5) Create a Framework to Update Your Letter of Instruction


Let's go through each step individually to simplify this important estate planning task. 


What to Include in Your Letter of Instruction


Step 1: Select Contents For Your Letter of Instruction 


A letter of instruction should contain, but not be limited to, the following:


  • A list of your banking accounts (savings, checking, CDs, Money Market accounts). 

  • Details on your debts (home loans, credit card debt, business loans, life insurance loans, car loans). 

  • Life insurance contracts and insurance policies.

  • Details on your retirement accounts (401(k), IRAs, Roth IRAs, Pensions). 

  • A list of your professional advisors and their contact information (CPAs, lawyers, insurance agents, financial advisors). 

  • A list of when bills are due, the amount, and what account they are debited from.  

  • Details on the beneficiaries for all your investments, life insurance, and bank accounts. 

  • The location of important documents (trusts, wills, power of attorney, private loan contracts, business contracts, etc.).

  • A list of the locations of your physical assets, such as jewelry and collectibles.

  • A summary of safe deposit boxes and directions on how to access them. 

  • If you have children, your wishes on the values you want them to develop and advice for reaching a particular milestone or age. You should also mention their primary doctors, allergies, and other key information. 

  • Log-in information for all of your online accounts. 

  • Burial wishes. 

  • Final words to your loved ones. 


Now that you know what to include, let’s organize this information effectively. 


Step 2: Arrange Your Information


To simplify writing your letter of instruction, consider creating an outline. An effective outline could use bullet points or categorize items based on their urgency or importance.


For instance, financial information could be grouped together, as could personal wishes and messages. This makes the document more user-friendly and easier to navigate. 


For example, you could create the following groups:


  • Locations of physical items and documents

  • Financial information

  • Details of your professional advisors

  • Personal wishes and final words to your loved ones


With your information neatly organized, the next step is to start drafting the letter.


Step 3: Begin Drafting


Congratulations! You are now ready to start putting pen to paper. 


An excellent way to complete this step is to imagine yourself walking your loved ones through what you own and what you owe, where it’s located, whom they should contact, and your personal wishes.


Once you have completed your rough draft, put it down, go for a walk, do something fun, and come back to review it with fresh eyes. 


To assist you, I have prepared a sample letter of instruction and other valuable estate planning resources. These resources provide guidance on the tone and structure, ensuring your letter is comprehensive and clear.


Now that your letter is drafted, the next critical step is ensuring its safekeeping.


Step 4: Plan the Storage of Your Letter of Instruction


Time to do the happy dance! Congratulations, you are now light years ahead of many people by completing your letter of instruction. It’s important to choose a secure storage option for your letter.


Here are a few suggestions:


  • Fireproof safe

  • Safe deposit box

  • Cloud storage (Dropbox, Gdrive, or my personal recommendation, Tresorit)


Each option has its pros and cons, like the fireproof safe offering physical security, while cloud storage provides easy accessibility. No matter which secure storage solution you select for your letter of instruction, ensure at least one family member you trust has access. Sharing a copy with your trusted financial and legal experts is also a wise choice.


Next, let’s address the secure storage of your passwords.


Password Storage


Despite common misconceptions, including password details in your instruction letter is unnecessary. 


You can instead provide just the essential account details in the letter of instruction and utilize a password manager to beef up your digital estate planning process and securely store your login data. 


However, be aware that some pose greater risks than others. For instance, companies like LastPass have faced multiple security breaches.


A safer option is 1Password, which offers very affordable solutions and has an emergency kit for a trusted advisor or loved one so they can access your passwords upon your passing. 


Step 5: A Framework to Update Your Letter of Instruction


Many reasons could trigger a need to update your letter of instruction. The important thing is to have a framework for doing so. 


A great way to ensure your letter of instruction remains current is by setting a yearly reminder on your calendar to review your letter of instruction. 


If you are still using a paper calendar, jot down a note to remind yourself to add this task for the following year. Otherwise, you can use a digital calendar to easily set a recurring yearly reminder to update your letter of instruction. 


Now that you understand the importance of updating your letter, let's look at some resources to help you create and maintain it.


Letter of Instruction Sample + Valuable Resources


Writing a letter of instruction might take just a few hours, but it can make things a lot easier for you or your family if something unexpected happens.


To help you finish this big job in planning for the future, check out our easy-to-use sample and free tools below:


👉Letter of Instruction Sample [Fillable PDP]


Don't worry if your first try isn't perfect. Having a written document, even if imperfect, is better than having none. This initial draft can be refined over time. 


The Bottom Line


The letter of instruction is a straightforward yet impactful tool to avert significant complications down the road. Integrating this letter with your broader estate planning efforts achieves two primary objectives: 


  • Guaranteeing your estate is resolved according to your wishes. 

  • Simplifying the process for your beneficiaries during tough times. 


Beyond the practical benefits, this letter offers peace of mind and clarity, not just for you but also for your loved ones. Regardless of its length or detail, it's crucial for everyone to include a letter of instruction in their estate plans.



 

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Nestor Vargas, CFP

Nestor Vargas, CFP®

Bienvenido! I own Green Mountain Planning, a commission-free retirement planning firm helping individuals 50 or older retire easily and confidently by reducing their tax bill, optimizing their investments, and creating an easy-to-understand income plan. When I am not geeking out on retirement planning strategies, you can find me at a concert at Red Rocks Amphitheater or traveling with our RV across the country.

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