Estate planning should include letters of instruction

| Jun 21, 2018 | Trusts |

Creating an estate plan requires formal legal documents, such as a trust, power of attorney, health care proxy and living will. However, effective trust planning should also include a letter of instruction containing information or guidance.

A LOI is an informal document that is not legally binding. One common use of them is to share information to the trustee concerning children with special needs or a disabled beneficiary of a special needs trust. These trusts are designed to improve a disabled beneficiary’s lifestyle without sacrificing any government benefits. Through a LOI, a person can instruct the trustee about the beneficiary’s personality and preferences and their wishes concerning expenditures for the beneficiary’s care.

LOIs often contain information on providing for beneficiaries who are minors. It may serve to further the intent of effective estate planning for improving these beneficiaries’ health, education and support.

Practical and essential information on settling estates may be contained in a LOI. This includes digital assets, such as usernames, passcodes and social networks. Funeral instructions and a list of people to contact when the person dies are also helpful. Other practical information included are the location of important documents, a recommended financial advisor or a preferred appraiser for determining the value of heirlooms and other important personal property. Veterans may relay information on their funeral, burial and survivor benefits and where their discharge papers are kept.

More recently, pet trusts have been created for the care of pets. These identify a trustee, a fund for the pet’s care, a caregiver and a trust beneficiary if the pets die. A LOI may contain information for the trustee and caregiver on the pet’s personality and behavior.

A LOI can be important to other people if there is a change to a trustee because of their death or disability. These documents may relay important information on this change to financial institutions. An estate attorney can help provide guidance on trusts and estates and their effective implementation. They can also prepare important formal and informal documents.