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The Letter of Final Instructions
In many households, one spouse or partner will handle most of the financial and business matters. The other person often has little or no involvement in these matters. This issue has been exacerbated over the past thirty years as many of these matters are now handled digitally which makes it even more difficult to pick up these duties without good documentation and an up-to-date status of all accounts.
I have done a zoom presentation to North Carolina government retirees numerous times in the past year about The Letter of Final Instructions. I thought that I was preaching to the choir with retirees. However, my last presentation was statewide to almost 300 attendees. For the first time, I was able to conduct an electronic poll of attendees. I asked the question “Where are you at in writing your letter on a scale of 1 to 5, 1 being not started and 5 being finished. There were 190 respondents, and only 3 said they were finished. Most attendees had not made very much progress with their letter. That was very surprising, as I suspected this audience would be in better shape.
The Letter is a complete and up-to-date set of written instructions for your loved ones and executor to follow for disposition of your estate and last wishes or for your family to follow if you are ruled incompetent. The risk of dementia and cognitive impairment increase substantially as people age. Therefore, this letter can satisfy the needs of either your estate or your incompetency.
Items to Include in Your Letter
The following is a list of items that most people will need in their letter. You may not need all of them and you may have some that I have not listed. You need to not only list these items, but you should explain how they are to be handled.
I recommend having beneficiaries for all asset accounts including checking and savings. Accounts to change would include joint accounts with your spouse. Business accounts would include utilities, cell phones and others. The executor needs to know about all accounts so they can take appropriate action.
Location of Documents and Files
You will likely have a combination of paper and digital documents and files. Files should be organized by categories such as taxes, investments, business accounts, etc. whether they are digital or paper.
Documents usually in paper form include estate documents, deeds, titles, safety deposit keys, insurance policies, and personal identity records (birth certificate, Social Security card, driver’s license and passport).
Documents in either paper or digital bank statements, income tax returns, investment account statements, business accounts (utilities, phones, subscriptions, gym), and medical records. It is a good idea to print a copy once a year for each digital only account.
Estate documents, deeds, valuables, and a copy of your letter should be put in a safe place, ideally a safe or safety deposit box.
Digital Records and the Law
Digital records include social media, photo albums, and all other records in digital form. NC law was changed in 2016 to govern access of digital assets: Revised Uniform Fiduciary Access to Digital Assets. Most other states have enacted similar laws.
Some people have made extensive use of social media and have lots of information about their life and their family. Vacations, birthdays, anniversaries, achievements and many other events. Their social media provides a legacy of their lives. Therefore, transfer of this information is important, whereas it is not important for many other people.
Assets and accounts of loved ones transfer to their estate immediately upon death. Therefore, to assure legal access to accounts, get proper authorization from the account businesses. If retention of digital records is important, check with specific companies to find out their policy for transfer upon death which may differ from the state law.
Your Letter should identify where these digital records are located: computer hard drive, thumb drive, cloud, or online. You should explain how to access digital accounts: name, address, phone, and online addresses.
Note: Online account access should only be done by people duly authorized to do so. Therefore, be careful about distributing Logon Ids and passwords.
My primary investment account will restore all lost funds from fraudulent online activity provided I do not disclose my ID and password to anyone else including family. Be sure not to violate any similar requirements that you may have.
Estate Documents
Everyone should have a will, and I also recommend the following additional estate documents: Power of Attorney or Durable Power of Attorney, Health Care POA and Advance Directive, Digital Assets – Authorization and Consent for Release, and trusts (if applicable).
A durable power of attorney remains in effect if a person is ruled incompetent whereas a regular power of attorney ceases. Both cease upon the death of the person.
A HC POA and Advance Directive assure that your needs are honored when you are unable to speak for yourself. I strongly recommend not leaving the Advance Directive to your loved ones as that requires them to make very difficult decisions on your behalf.
The Digital Assets Authorization will be needed to allow your executor to gain access to digital records like social media, photo albums and all other records in digital form.
Be sure to list all your personal property and who gets it as this can avoid family issues.
Taxes
The IRS requires taxpayers to retain 3 years of tax returns, but if discrepancies are found in an audit, they can go back 7 years. Therefore, keep 7 years of returns to be safe. Be sure to retain supporting documentation. Failure to provide supporting documentation for deductions can be costly in an audit.
Provide your tax preparer’s name and contact information. Keep good records of all tax related transactions for the current year including RMDs, estimated taxes, tax credits, income, and deductions. Failure to keep good records will make it difficult for others to come behind you and file your return.
A regular tax returns must be filed for the deceased in the year of death and a separate return for the estate.
Letter Format
Your Letter layout and style is based upon your preferences. I recommend using attachments for lists and some documents. Examples: contacts, accounts, auto deposits and payments, medical providers, personal assets, and financial assets. Including a paper copy of electronic statements once a year is a good idea.
My letter starts with a checklist, each item has no more than two lines. It is followed with a detailed set of instructions for those items requiring it, and then attachments for all the lists and documents needed.
Final Recommendations
Review and update your letter every year. Keep a copy in a safe place, ideally a safety deposit box or safe. Give copies to your loved ones and executor who are tasked with carrying out your final instructions. Review the letter with them to make sure they understand it. Update your instructions as needed.
Whoever handles your estate may need assistance from others to complete execution of your letter. Examples include an estate attorney, tax professional, financial adviser, and someone with computer proficiency.
Thanks for such a complete list. Very timely, as we are in the process of updating our Letter.
I’ve written about this before, from a digital security perspective, but The Letter is another strong reason to adopt a password manager. Online access by a surviving spouse or executor is much easier when there’s one place to look and one password to know (secured with two-factor authentication).
Jerry, thank you so much for posting this.
Thank you! This was superb and helpful. Very thorough, and I will be using this to help draft my new “letter.” I used Rob Berger’s “Blue Binder” as my initial guide. He describes it in the embedded YouTube link.
I did this about 5 years ago. Your excellent article has given me some ideas on how I can not only update my previous letter, but improve on it. Thanks.
I would like to recommend another book, but Mike Piper, who has written a number of short books on financial questions: “On the Death of a Spouse”. In the place where we keep our other important documents, Willis, passports, etc. I have placed this book on top of everything. One of the great things about the way he organized the book is that he puts the things that have to be done more or less immediately right at the beginning of the book and the other stuff that is necessary but not urgent comes later. That way the spouse is not quite so overwhelmed but still has time to grieve.
The title suggests the book is for after the death. My article describes the things that need to be done before the death of a spouse. Making sure the things I describe are well documented and organized makes it easier to do everything when the time comes.
A few years ago I used Piper’s book to help me write The Letter. Nothing like looking back through the eyes of my spouse after I’m gone to know what to write about.
Your list is excellent! Thanks for this excellent piece.
Thanks for this, Jerry. I have a “Letter” but your article prompted a few tweaks.
This is a great blueprint for managing estate-related documentation. I’m printing it for a checklist against our current documents. I was not an NC state employee, but my wife is a retiree from the Wake County school system. When do you give you presentation and who is eligible to attend?
It has been over a year since the last one. I have given as zoom presentations to NC local and state retirees who are members of RGEA. RGEA provides a lot of information and services to retirees including focusing upon protecting retiree benefits. We use lobbyists to assist in that effort. She can learn more about RGEA at this website: http://www.ncrgea.com. It is a great organization with over 50k members. She would need to be a member who view presentations.
Excellent. Thanks
Jerry, this is a great blueprint.
In 2020 we had our wills updated. The attorney used a boilerplate program that did not include much of what you recommend in your post.
Last year I used WillMaker software to update the wills and POAs. The software includes letters for all of the things you list in your instructions.
I can understand if people don’t want to use a DIY method to prepare wills and POAs, still, the WillMaker software is not expensive and can be used to help produce all of the letters you mention in your article.
I also used WillMaker to prepare a transfer on death affidavit, naming beneficiaries for our home, and have filed that with our county. This will keep the house out of probate.
Jerry, thanks for this. I look forward to audition our current estate documents against it.