Letters of Instruction to Your Fiduciaries

One of the most helpful things a principal completing an estate plan can do for their nominated agents or fiduciaries is to draft a Letter of Instruction (LOI) to provide additional context for their intentions. Like following a recipe with illustrations, a principal not only helps ensure their intent is carried out but also can provide closure and comfort to loved ones.

What is a Letter of Instruction?

A Letter of Instruction is an informal letter a principal drafts to whoever they have designated to act on their behalf and contains information they would want that person to bear in mind when acting for them. While not legally binding, it is a blank canvas and can contain any direction or information a principal feels pertinent. For example, if a principal has catalogued their digital assets with associated login information, they can specify the location of the catalogue and how to access it. Additionally, a principal can define guiding principles for their agents or fiduciaries to help in guiding their decisions, such as when to make trust distributions to beneficiaries when extraordinary occurrences arise or additional circumstances influencing withdrawal of life-sustaining treatments.

Aren’t Estate Planning Documents Supposed to Have This Information?

While most estate planning documents cover basic and general circumstances, they usually lack specificity as these documents focus on empowering agents or fiduciaries to act on a principal’s behalf. Thus, there is much information that may be “lost in translation” and that an LOI can help address. For example, a Last Will usually specifies who gets what property after a principal passes and rarely details why. An LOI given to a personal representative or executor to provide more context, can help loved ones understand decisions that might otherwise be perplexing, confusing, or puzzling. For example, if there is a family keepsake or heirloom left to one of several children, the other children may better accept the distribution if shown an LOI signed by the principal and explaining why the principal decided the way they did. Similarly, if life-sustaining treatments are removed based on guiding principles specified in an LOI, the LOI can offer more certainty to one’s agents that they are effectuating the principal’s intent rather than relying on their own or other people’s recollections.

How Do I Draft an LOI?

There is no standard for an LOI. However, a basic principle is to tailor an LOI to the specific agent or fiduciary and what they will most likely need guidance with. For example, a personal representative or executor will likely not need guidance on life sustaining treatments, unless the person was nominated to also serve as health care agent. Similarly, if different agents or fiduciaries are specified under financial and health care durable powers of attorney, the health care agent will likely not require guidance for financial decisions. Furthermore, if there are foreseeable concerns, such as ardent family members that may demand funeral services be of a particular denomination but conflict with a principal’s beliefs, an LOI can warn and empower an agent for disposition to take proactive and firm action to ensure the principal’s intent takes precedence. Last, it is recommended to sign and date an LOI to provide historical context if multiple LOI’s are drafted and that the LOI expresses the principal’s final intent.

What Do I Do With an LOI?

After drafting and executing an LOI, provide a copy to your specific agent or fiduciary and keep a copy with the original estate planning documents. If possible, provide a copy to your estate planning attorney to keep in your client file. If you opt to revise your LOI, make sure to provide updated copies to each agent or fiduciary or attorney that received the prior version. The great thing about LOI’s is that do not require any formality to draft and execute. Thus, if circumstances change, a principal can easily update their previous LOI to reflect this change and circulate it to the specific parties with very minimal effort.

If you would like to learn more about drafting a Letter of Instruction or have a specific question about how to implement one with your estate plan, please contact one of our knowledgeable and experienced estate planning attorneys today.