A detailed, informative letter, also known as a letter of instruction, can be invaluable to your successor trustee or executor. The article “Why You Should Write a Letter to Your Executor—and What to Say in It” from The Wall Street Journal explains how you can make your wishes known. Your revocable living trust or last will and testament does have many directions. However, there may be things you want your successor trustee or executor to know that may not be included in your trust or will. This is especially important if death is sudden. The letter, which you should sign and date, can help prevent potential disputes, by minimizing any confusion around your intentions, priorities and goals.
Here are some things to consider when drafting a letter of instruction:
Your thoughts about wealth. Share your story about how you came to the assets that you are leaving to your beneficiaries. How was your wealth created, what do you value and what are your long-term goals for your wealth? Do you want family members to invest the assets, so they grow over generations, or do you want them used for college education costs for grandchildren?
Describe key players in the family. It is best if the person left in charge knows the members of your family. However, they may not know the family dynamics or history. Giving them your insights, may help them anticipate issues. Does one child tend to take over and speak for everyone, without being asked? Are there substance abuse issues in the family that need to be considered? Present your successor trustee or executor with your concerns, so they can be mindful of how the family works (or doesn’t) as a unit.
What matters to you? This is especially important if you don’t want your beneficiaries to be dependent upon their inheritance, and instead want them to be self-reliant. Share your values to encourage their earned success. Make it clear if you want to protect the family wealth, so it can be used to empower future generations and for family members to be responsible for their own financial well-being.
Give your successor trustee or executor the power to make decisions, even when that means saying no. Considering the size of your wealth and the family members who are your beneficiaries, you probably have a good idea of who would do what with their inheritance. If you don’t want your wealth to be used for a start-up by a son who always bets on the wrong horse, say so in the letter to your executor. If you are hopeful that a daughter will use her inheritance for a down payment on a home for her family, you should also express that.
Some wishes for your wealth can be expressed through the use of your revocable living trust and other estate planning techniques. Your estate planning attorney at The Andersen Firm will help create a plan that incorporates asset protection, tax planning and tools to distribute wealth in the way that you wish. Our experienced estate planning attorneys have worked with many families and understand the challenges and pitfalls that are presented any time wealth is transferred from one generation to the next.
Reference: The Wall Street Journal (April 8, 2020) “Why You Should Write a Letter to Your Executor—and What to Say in It”