When you draft an estate plan, the centerpiece is your will or living trust. Such a document determines who gets what, where, when and how, as well as tying up the loose ends of your estate. A valid will or living trust can be supplemented by other legally binding documents, such as trusts (or additional trusts), powers of attorney and health care directives.

But there’s still a place at the table for a document that has absolutely no legal authority: a “letter of instructions” to your heirs. This informal letter can provide valuable guidance and act as a road map to the rest of your estate.

Taking inventory

Begin your letter of instructions by stating the location of your will or living trust. Then create an inventory of all your assets and include their location, any account numbers and relevant contact information. This may include, but isn’t necessarily limited to, the following items:

• Checking and savings accounts,
• Retirement plans and IRAs,
• Health and accident insurance plans,
• Business insurance,
• Life and disability income insurance,
• Records of Social Security and VA benefits,
• Stocks, bonds, mutual funds and other investments,
• Safe deposit boxes and vaults and their contents,
• Information on real estate holdings,
• Information on credit cards, loans and debts,
• Social Security number and birth certificate,
• Passports and other identification papers,
• Copies of tax returns,
• Any divorce or citizenship papers, and
• Any tangible assets not readily found.

The contact information should include the names, phone numbers and addresses (including emails) of the professionals handling your financial accounts and paperwork, such as an attorney, CPA, banker, life insurance agent and stockbroker. Also, list the beneficiaries of retirement plans, IRAs and insurance policies and their contact information.

And don’t forget the location of the items and any passwords, PINs or other information needed: Your heirs can’t access a safe without the key or combination, nor will they be able to access your information online.

Guidance for personal preferences

Remember that a letter of instructions is more than just a listing of assets and their locations. Typically, it will include other items of a personal nature, such as funeral, burial or cremation arrangements, accounting of fees paid for cemetery plots or mausoleums, the names, addresses and telephone numbers of people and organizations to be notified upon death, and specific instructions for handling personal and financial affairs after you’re gone.

The letter can also expand on instructions in a living will or other health care directive. For example, it might provide additional details about the decision for being taken off life support systems. It may also cover charitable contributions you wish to be made after death or the manner in which property should be donated to charity.

Putting pen to paper

As you’re writing your letter, bear in mind that there are no legal requirements backing it. And just like a will or living trust, the letter should be updated periodically to reflect significant changes in your life. Finally, keep the letter in a safe place where the people whom you want to read it can easily find it.

Sidebar: Make it your mission (statement)

Many people today are moving away from a rules-based approach to estate planning and embracing a principles-based approach. Rather than conditioning a child’s inheritance on a rigid list of “acceptable” behaviors, for example, a principles-based approach allows greater flexibility for trustees and others to make decisions based on the values you wish to promote.

A family mission statement can be an invaluable tool for defining and communicating these principles and values. Because each family is different, there’s no cookie-cutter formula for drafting a family mission statement. The most important thing is for the statement to clearly articulate your family’s shared values, whatever they may be.

Ideally, the mission statement will also create mechanisms for intrafamily communication and for putting the statement’s ideas into action. For example, the statement might call for regular family meetings and create a governance structure for managing the family’s wealth and making decisions about charitable giving and other endeavors.