In this article, I’m sharing what a letter of instruction is and EXACTLY how to write one.
In fact, ignoring this simple estate planning task could cause major challenges for your heirs if you pass away.
If you want to learn what a letter of instruction is (and how to create one!), you’ll love this article.
Key Takeaways
- A letter of instruction is a document that lists all of your important financial account information in one place.
- This important estate planning document is intended to help your family members (or executors) if something happens to you.
- The information included in your letter of instruction can be stored in a physical or electronic document, or in a secure password manager.
What is a Letter of Instruction?
A letter of instruction is a document that lists all relevant financial information that your family members or executor need if something happens to you.
It also lists contact information for important people in your financial life.
Paired with other estate planning documents (e.g., trust, will, power of attorney, etc.), a letter of instruction will help ensure your estate is settled per your intentions.
This document is so essential that everyone (yes, everyone!) should have at least a simple version on file for their heirs to access.
To better help you understand what a letter of instruction is, consider the following story:
Jack and Jill have been married for 30 years.
Jill is the household “Chief Financial Officer (CFO),” and Jack follows her lead with everything money-related.
Their mortgage is linked up to Jill’s checking account.
The credit cards are in her name.
Jill oversees the insurance policies and pays the bills.
Most importantly, Jill is the point person with their financial planner and CPA.
If something happens to Jill (e.g., injury, illness, death) and she can no longer manage the household finances, Jack would need to take over.
Where does he start? What is the process? Who should he contact?
This is where a letter of instruction can help.
How to Write a Letter of Instruction (5-Step Process)
The hardest part about writing a letter of instruction is knowing where to begin and what to include.
While you can always rely on your financial planner or attorney to help with this important document, you may want to write the first version yourself.
To help you take action, we developed a simple 5-step process showing you how to write a letter of instruction:
- Identify What to Include in Your Letter of Instruction
- Determine How to Organize Your Information
- Put Pen to Paper
- Consider a Password Manager
- Choose Where to Put Your Letter of Instruction
Let’s dive into each step so you can cross this important estate planning task off your list!
Step #1: Identify What to Include in a Letter of Instruction
The letter of instruction should include the following information:
- A summary of all assets and debts
- The location of valuable physical assets (e.g., jewelry, art, collectibles, real estate)
- Details about your retirement and investment accounts
- A list of people who have an important role in your finances, such as your attorney, CPA, financial planner, and insurance agent(s)
- Specific directions regarding how your estate should be settled
- The location of important legal documents (e.g., living trust, will, health care directive, birth certificate, social security card, real estate deeds, etc.)
- Copies of your retirement account beneficiary designation elections
- Information on safe deposit boxes and how to access them
- Directions for how to handle and care for pets
- Usernames and passwords for online access to all financial institutions
- Information about any credit freezes you have in place
- Details on outstanding loans like mortgages, credit cards, lines of credit, personal debt, and auto loans
Although this is not an exhaustive list of everything that could go into a letter of instruction, it should help get you started.
You should add other relevant information that you feel would be most helpful for future readers of this document.
Step #2: Determine How to Organize Your Information
Before writing out all the details, consider creating an outline for your letter of instruction. An outline will help you determine how to organize the information.
For example, you can group information into different categories as follows:
- Financial accounts
- Names and contact info of important professionals
- Location of physical assets and/or documents
Or, if you have a larger list of heirs, you can group instructions based on who will oversee different tasks like this:
- Spouse: Here are the instructions for how to access our bank accounts.
- Brother: Here are the instructions for how to find our family’s jewelry.
- Daughter: Here are the instructions for caring for our family dog.
After you’ve finished the outline, you can begin writing your letter of instruction and filling in the details.
Step #3: Put Pen to Paper
As you write (or type!) your letter of instruction, include all important details and information you believe will be valuable to your heirs.
You might also add some personal touches along the way.
Remember, this letter will be read after something has happened to you. The personal touches you add will help your heirs during this difficult time and provide perspective to the key areas of the letter.
Before you put your pen (or keyboard) down, review the letter and then document a repeatable process for making updates. It’s critical to regularly update your letter of instruction as your accounts, circumstances, and relationships inevitably change over the rest of your life.
Step #4: Consider a Password Manager
Contrary to popular belief, you don’t have to list password information in your letter of instruction.
One alternative is to list basic account information on your letter of instruction and then adopt a password manager to store login credentials safely.
Two popular password managers are LastPass and Dashlane. Both applications offer free and paid versions and an important “Emergency Access” feature. According to LastPass:
“Emergency Access offers an easy way to give others the passwords and logins they’d need to manage accounts on your behalf after an unexpected emergency or death.”
Letter of instruction aside, a password manager is highly recommended for everyone — it’s part of Cybersecurity 101.
Step #5: Choose Where to Put Your Letter of Instruction
Congratulations! You’ve done the hard part. You’ve summarized the most important information related to your financial life in an easy-to-read document.
Now what? Where do you put your letter of instructions?
Here are a few options to consider:
- Fireproof household safe
- Safety deposit box
- Secure note in your password manager or the cloud (e.g., Dropbox, Google Drive)
Whichever option you pick for securely storing your letter of instruction, ensure that at least one trusted family member has access. You can also consider giving your trusted financial and legal professionals a copy.
Letter of Instruction Sample + Free Resources
Writing a letter of instruction should only take a couple of hours, but it could save you (or your heirs) months of hassle if something unplanned happens.
To help get you complete this critical estate planning task, grab our letter of instruction sample and free resources below:
- Letter of Instruction Sample [Fillable Template]
- Estate Planning Document Checklist [PDF]
- Flowchart for Your Heirs to Compliment Your Letter of Instruction [PDF]
Remember, the first draft of your letter of instruction doesn’t need to be perfect. Having something on file is better than nothing, and you can regularly make updates each year when reviewing your retirement plan.
Bottom Line
The letter of instruction is a simple document that can help prevent major challenges in the future.
By pairing this letter with the rest of your estate plan, you will help to accomplish two main goals:
- Ensure your estate is settled as you intended
- Simplify things for your heirs during a difficult time
Whether your letter of instruction is short and brief or long and detailed, everyone (yes, everyone) should take the time to have this as part of your estate plan!
