Using a Testamentary Letter to Explain Your Estate Plan

/ January 20, 2016

Your estate plan likely includes formal documents (a will, perhaps one or more trusts) that direct transfers of your property when you die. But those documents won’t identify each and every item to be transferred. Eventually, whoever settles your affairs will find a sentence in one of your documents such as “I leave the rest and remainder of my property to…” The unavoidable question at that point will be “Have we found everything?”

One way to provide some assurance that everything has been found, and perhaps to explain the why’s and wherefores of your plan, is to write one additional, informal document called a testamentary letter.

What should this letter say? That depends entirely on what you believe will help others understand, appreciate and implement your plan. It can be matter-of-fact, just giving instructions about where to find safe deposit boxes, financial records and other information needed for first steps. Or it might explain what you hope to accomplish with the property that you will be passing on to survivors or charities, or recommend people to help with finances or any other matter.

Who should read the letter? That’s equally a personal choice. If there will be a probate process, the personal representative usually should be included, and some thought given to what he or she will need to get started. But a letter may be meaningful and helpful even when all of your property will be transferred in ways that avoid probate. It can be signed and dated if desired, but witnesses are not needed since the letter is not a formal legal document.

Here are some suggestions for composing a testamentary letter. Bear in mind that they’re only suggestions; the structure and tone ought to follow what you want to say. They can change, too, if some parts of the letter will speak to particular individuals only. And even if you’re not comfortable giving the letter to anyone while you’re alive, think about how to ensure it will be found and read when the time comes.

Introduction

Tell the readers why you’ve written the letter. Your reasons might include: explaining your estate plan in non-legal language; providing instructions or words of comfort to your family; tying up loose ends; or just trying to minimize avoidable delays in the inventory and administration process. Clarify the relationship of the letter to the will or other formal legal documents; everyone should understand that the legal documents control in the event of inconsistency with the letter.

Overview of the estate plan

Summarize the overall plan with particular attention to any choices that beneficiaries or the personal representative will have to make, and any deadlines connected with those choices (for example, what will happen to any disclaimed entitlements). If the plan is complicated, this section might be written by the drafting attorney, but, regardless, it should give a “big picture” to the personal representative and any trustee(s). You could also address likely questions from those who will receive property, if their expectations may differ from the actual property disposition.

Cash for initial expenses of administration

One of the first concerns after your death may be access to cash that will be needed for funeral expenses, outstanding bills, and perhaps day-to-day family expenses. If your letter is going to be lengthy, make this information easy to spot. It should include bank accounts and any other relevant sources, such as life insurance policies, home equity credit line accounts or similar lending arrangements.

Location of documents and records

List, with instructions about locations, each of the items below that applies to your own situation. Try to anticipate what will be needed for tax returns, any sales triggered by your death (for example, closely held business interests), transfers of property to intended recipients and other duties of administration. Obviously, some listed items may not apply, or you may have other important documents that are not listed but that you’ll want to include.

  • Will
  • Trust instruments
  • Employee benefit plan documents
  • Social Security information
  • Insurance policies (life, burial, etc.)
  • Business agreements (partnership agreements, buy/sell, redemption, etc.)
  • Retirement plan documents
  • Power(s) of attorney (to or from others)
  • Income and gift tax returns
  • Birth and marriage certificates
  • Divorce or separation agreements
  • Patents/copyrights/royalties
  • Passport
  • Prenuptial and/or postnuptial agreements
  • Cemetery plot and other preneed arrangements for funeral or other services
  • Bank accounts (passbooks, bank statements, etc.)
  • Certificates of deposit
  • Deeds to real estate
  • Titles or registrations for cars, boats, and other personal property
  • Brokerage accounts
  • Stocks and other securities held personally
  • Other investments (limited partnerships, notes receivable, etc.)
  • Property ownership records (when and how acquired, basis)
  • Mortgages and notes payable
  • Credit cards and charge account information
  • Organizations/memberships
  • List of electronic files and accounts and corresponding user identification and passwords

Who to contact

Identify people who can be resources for your family and the personal representative. Among the ones to consider listing, with contact information, are the following. Again, there could be others.

  • Attorney
  • Accountant
  • Insurance advisor
  • Banking officer
  • Investment adviser or broker
  • Pension or retirement plan administrator(s)
  • Physician
  • Current and former employers, employees
  • Minister
  • Funeral director

Instructions and suggestions to surviving spouse, family and others

Depending on the circumstances, the survivors might benefit from some suggestions and directions about what to do immediately following your death. This could even be a separate letter, in a more personal tone. Possible concerns might be any of the following.

  • Reminders about the need to notify people (such as family, friends, employers, or employees) or institutions (such as the Social Security Office, Veteran’s Administration, life insurance companies, etc.).
  • Instructions about changing ownership registration for personal assets (autos, bank accounts, stocks, the family residence, etc.).
  • Notes about significant financial transactions, major purchases, loans, etc., whether proposed or recently commenced, that may have deadlines.
  • The location and identification number of any safe-deposit box and names of people who have access. If the box contains cash, consider providing an explanation of the sources.

Benefits and entitlements

If the information isn’t brought together elsewhere (such as in a safe deposit box), identify the sources (and amounts) of death benefits and provide specific information about who to contact to file and expedite claims for the following:

  • Social security and VA benefits
  • Employer retirement plans
  • IRAs, Keogh plans, and SEPs
  • Annuities
  • Income continuation plans
  • Civil service entitlements

Disposition of illiquid investments and personal effects

If any investments were acquired for personal or sentimental reasons, consider whether any recipient will share your interests. If not, you may want to identify the best potential markets for sale of the items. Shares of a start-up company linked to a social cause might be an example. Unusual collectibles might be another.

Even though personal property may be disposed of by a list attached to a will, explaining why someone did or did not receive a particular item may be helpful. Also, there will probably be some items that aren’t on any list you make, so the testamentary letter might address those excluded items in general terms.

Funeral and burial arrangements

Visualize the ideal funeral service and all the other rituals of saying goodbye, and let those who will be making the arrangements know. Each decision that can be made in advance will be one less strain on someone who may be feeling overwhelmed. Whether general or specific, thoughts about any of the following may be helpful to those who will be taking charge.

  • Cemetery preference and information (or the specifics of a plot already purchased)
  • Funeral home preference and details about any prepaid services
  • Desires regarding burial, entombment, or cremation (but note that, because donation of organs or other body parts may be time sensitive, that should be addressed in some other manner, such as in your health care directive or through a donor registry)
  • An obituary that you’ve written for yourself
  • A photo or photos of yourself that you would like used, or a request that no photo be used
  • Notification of out-of-town relatives and friends
  • Particulars about the funeral services (who should officiate, how elaborate, flowers or donations, songs, text for a eulogy, etc.)

General comment about how to begin

Writing a testamentary letter can be challenging because it requires thinking about the immediate aftermath of your death. At very least, try to identify documents that will need to be found right away, and the people who will need to be contacted. It’s always hard to predict how grief will affect anyone, but it’s prudent to assume that it can cloud thinking about practical matters. Discussing even seemingly obvious tasks will be forgiven. In the broadest terms, a testamentary letter is worthwhile if it’s something that, given the chance, the survivors and the personal representative would thank you for.

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