Letter of Instruction Explained (in plain English!) + Free Template

What is a letter of instruction and how do you write one? I answer those questions + share a free letter of instruction template (PDF) so you can take quick action.
Letter of Instruction Explained (in plain English!) + Free Template

Today I’m sharing what a letter of instruction is and how to quickly create one.

In fact, ignoring this simple task could cause major challenges for your heirs when you pass away.

If you want to simplify things for your family when they settle your estate, keep reading.

What is a Letter of Instruction?

To help you understand what a letter of instruction is, consider the following story:

Jack and Jill have been married for 30 years.

Jill is the household “Chief Financial Officer (CFO)” and Jack follows her lead with everything related to money.

Their mortgage is linked up to Jill’s checking account. 

The credit cards are in her name.

Jill oversees the insurance policies and pays the bills.

Most importantly, Jill is the point person with their financial planner and CPA.

What happens when Jill is no longer able to manage the responsibilities? This can easily happen, perhaps as the result of illness, injury, or even death.

Regardless of the reason, the ball is now in Jack’s court to manage everything.

“Where does he start? What is the process? Who should he contact?”

This is where a letter of instruction can help.

Let’s Define Letter of Instruction

A letter of instruction is a list of all relevant financial information that your family members or executor need if something happened to you.

The letter of instruction should include:

  • A summary of all assets and debts
  • The location of valuable physical assets (e.g. jewelry, art, collectibles, real estate)
  • Details about your retirement and investment accounts
  • A list of people who have an important role in your finances, such as your attorney, CPA, financial planner, and insurance agent(s)
  • Specific directions regarding how your estate should be settled
  • The location of important legal documents like your living trust, will, health care directive, birth certificate, social security card, real estate deeds, etc.
  • Copies of your retirement account beneficiary designation elections
  • Information on safe deposit boxes and how to access them
  • Directions for how to handle and care for pets
  • Usernames and passwords for online access to all financial institutions
  • Details on outstanding loans like mortgages, credit cards, lines of credit, personal debt, and auto loans

The letter of instruction can exist as a physical document, but it’s important to keep it in a secure place, such as a household safe.

Since your letter may contain sensitive login information, you don’t want to leave it out where it can be found by anyone other than your surviving family members or executor.

Using a Password Manager

On that note, it’s important to mention that you don’t have to list password information in this document at all.

One alternative is to only list basic account information on your letter of instruction and adopt a password manager to safely store login credentials.

Two popular password managers are LastPass and Dashlane. Both of these applications run on a “freemium” business model, meaning they offer a free base service, as well as an upgraded paid version.

For most people, the free version works just fine. (Letter of instruction aside, a password manager is highly recommended for everyone. It’s part of cybersecurity 101.)

Both of these password managers offer what’s called an “Emergency Contact” or “Emergency Access.” LastPass summarizes it well:

“LastPass Emergency Access offers an easy way to give others the passwords and logins they’d need to manage accounts on your behalf after an unexpected emergency or death.”

Setting up Emergency Access takes less than 30 seconds. There’s no reason not to do it!

Where Do I Keep My Letter of Instruction?

Congratulations! You’ve done the hard part.

You’ve summarized the most important information related to your financial life in an easy-to-read document. Your side letter of instruction is complete!

Now what? Where do you keep this thing? You have a few options.

If you have a household safe, you can keep it there. Alternatively, if you use a safety deposit at your local bank or community credit union, that can be a good place too.

Lastly, you can also choose to keep the contents of your letter of instruction as a “secure note” in LastPass or Dashlane.

Whichever option you pick for securely storing this document, make sure that your at least one trusted family member has access.

Summary and Free Template

Do you need a letter of instruction? Absolutely.

Even if both you and your spouse are involved in your finances, having all your important financial information in one place can make things easier when one spouse is unable to continue their role as Chief Financial Officer.

Creating this document should only take a couple of hours, but it could save you (or your partner) months of hassle if something unplanned were to happen.

Not sure where all your accounts are? Consider using account aggregation software such as Mint or a financial planning client portal if your advisor provides one for you. (Just know and expect to be advertised to if using free products like Mint.)

So, get started. You can even use this template. Create your letter of instruction for you, your spouse, and your loved ones today!