Letter of Instruction for Heirs

Senior woman writingA ‘letter of instruction’ can spare you and your heirs a lot of stress if you die or become incapacitated. It can help your family sort through your affairs and find the information they need to help you. Without it, they may miss important items or become overwhelmed trying to sift through all the documents you have left behind.

Although it’s important to have an updated estate plan, there’s a lot of information your heirs and/or caregivers need to know that doesn’t necessarily fit into a will, trust, or other document. For instance: Where can your heirs find your insurance policies? How can they locate your bank accounts, and access your safe deposit box? How can they be sure they’ve accounted for all your assets?

The solution is a “letter of instruction:’ which can provide your heirs with guidance if you die or become incapacitated.

A letter of instruction isn’t legally binding, but it can give your heirs crucial information to help them tie up your affairs. Without such a letter, it can be easy to miss important items, or become over- whelmed trying to sort through all the documents you’ve left behind.

The letter can be informal, and it doesn’t have to follow any specific format. It’s far better to write something than nothing, so don’t worry that it has to be perfect.

Here are some good things to cover to get you started:

A list of people to contact if you die, and of beneficiaries of your estate plan

  1. Where to find important documents, such as your will, insurance policies, financial statements, deeds, and birth certificate
  2. A list of assets, such as bank and investment accounts, insurance policies, real estate holdings, and military benefits
  3. Passwords for online accounts
  4. The location of any safe deposit boxes
  5. Contact information for lawyers, financial planners, brokers, tax preparers, and insurance agents
  6. A list of credit card accounts and other debts
  7. Organizations that should be notified in the event of your death (such as professional organizations or boards)
  8. Instructions for a funeral or memorial service
  9. How you want sentimental personal items to be distributed
  10. A personal message to family members
  11. Once you write the letter, be sure to store it in an easily accessible place and to tell your family about it. A letter is of no value if your heirs don’t know about it, or can’t find it!

Also, it’s a good idea to check the letter at least once a year to make sure it’s up-to-date.

Now’s A Good Time To Review Your Beneficiary Designations

Grow Your 401KDid you know that your will does not determine who gets your IRA or your 40l(k) account when you die?
That’s right – these accounts are “non-probate” assets, which means they’re not covered by your will. Instead, they will generally go to whatever per­ son you named as the beneficiary when you set up the account.

Similarly, your will doesn’t determine who gets your life insurance – that will go to the named beneficiary on the policy. And your brokerage account might have a beneficiary as well.

So as part of your estate plan, is essential from time to time to review your beneficiary designations. For example:

  • You’ve remarried, but you want to leave your 401(k) to your children from your prior marriage. Under federal law, even if you name the children as beneficiaries, your account will go to your new spouse – and not your children – unless your new spouse signs a waiver.
  • Is one of your beneficiaries a trust? If so, it’s a good idea to have this reviewed. There have been a lot of developments in the law recently, and you might want to change the way the trust is set up in order to make sure you’re still getting all the possible tax advantages.
  • Is your estate listed as your IRA or 40l{k) beneficiary? This is generally a bad idea, because you can often save a lot of taxes by naming individual beneficiaries instead and stretching out payments over time.
  • Is one of your beneficiaries a minor? This could require going to court and setting up a guardian­ ship, which can be time-consuming and expensive. There are better alternatives.
  • Do you plan to leave money to charity? It might be wise to leave IRA or 40 l (k) assets to charity, rather than other assets. That’s because heirs who receive IRA distributions have to pay income tax on them, whereas they probably won’t have to pay tax on other assets.
  • Did you also know that a divorce may not automatically change your beneficiary designations?

Florida has a new statute, which became effective 07-01-12 that provides when an individual dies after a dissolution or annulment of his or her marriage, a beneficiary designation, which designates the former spouse as a beneficiary, becomes void upon the divorce and the former spouse is deemed to have predeceased the decedent. See Florida statute 732.703

There are exceptions to this statute. It is not automatic. It does not apply to the extent that controlling federal law provides otherwise (for example plans that are covered by the federal statute known as ERISA, such as 401ks) or if the governing instrument provides otherwise or if state law other than Florida governs the contract or agreement, to name just a few of the exceptions to the statute.



Living Wills


A living will allows an individual to take control of his/her future medical treatment in advance of an incapacitating illness or injury by specifying in advance whether or not a person is to have his/her life prolonged through artificial or extreme methods. It goes into effect only when you are no longer capable of making decisions about your medical treatment. Living Wills are made more effective when supplemented by a health care proxy or durable power of attorney for health, naming a relative or friend to act on the patient’s behalf if he/she is unable to do so.

In accordance with Florida law, the will must be signed by the principal in the presence of two witnesses, one of whom is neither a spouse nor a blood relative of the principal. If the principal is physically unable to sign, one of the witnesses must subscribe the principal’s signature in the principal’s presence and at their direction.

In the absence of a living will, the decision to withhold or withdraw life-prolonging procedures from a patient may be made by the health care surrogate designated by the patient unless the designation limits the surrogate’s authority to consent to the withholding or withdrawal of life-prolonging procedures. The surrogate must be satisfied that the patient does not have a reasonable; probability of recovering capacity so that the right could be exercised by the patient and the patient has an end stage condition, is in a persistent vegetative state, or the patient’s physical condition is terminal.

This article is for general reference only, and it is not intended to be a substitute for the hiring of an attorney. It is always best to consult an attorney about your legal rights and responsibilities regarding your particular case.

Public Resources Available From the Florida Bar

FloridaBarLogoThe Florida Bar website has valuable, free resources available for the general public. Please visit the Florida Bar Association. On the home page at the top left hand corner, click on the link “For the Public”. There you will find Consumer Pamphlets on a variety of legal topics such as:

1. Consumer Tips.

2. Consumer Forms.

3. Excerpts from the Rules Regulating the Florida Bar.

4. The web address and telephone number for the Lawyer Referral Service.

5. Help For Homeowners Facing Foreclosure.


Public Resources Available From the American Bar Association

Please visit the American Bar Association website. There you will find a large number of excellent publications on consumer topics, the fair debt collection practices act, elder law, estate planning, family law, veterans benefits, health law, voting rights, foreclosure help and mediation, to name just a few.

If you wish, you can call the ABA service center during normal business hours at 1-800-285-2221.

Or, you can write to the ABA at: 321 North Clark St. Chicago, IL. 60654

Take advantage of this valuable free resource.

The ABCs of Arbitration

arbitrationIn the event of unsuccessful challenges to the arbitration award or failure to comply with 
the award, the prevailing party is ordinarily entitled to costs, including a reasonable 
attorneys’ fee for having to compel arbitration or defend or enforce the award.

In the event a dispute shall arise between the parties to this contract, it is hereby agreed 
that the dispute shall be referred to the American Arbitration Association for arbitration 
in accordance with American Arbitration Association Rules of Arbitrations. The 
arbitrator’s decision shall be final and binding and judgment shall be entered thereon.

WHEN IS ARBITRATION USED? Arbitration is used in many different 
fields, and its use continues to 
increase. Some contexts in which 
parties commonly use arbitration 

Consumer disputes, to resolve 
disputes between consumers 
and companies. Commercial contexts, to 
resolve disputes between 
companies. Employment and labor 
disputes, to resolve disputes 
between workers, or between 
employers and employees.

Professional sports leagues, to 
resolve disputes.


Arbitration is a form of dispute resolution in which an arbitrator hears a dispute in a 
private, court-like setting and then makes a final decision that binds the parties. The 
parties select the arbitrator, who is often an 
expert in the subject areas of the dispute. The 
emphasis is on the equity of the situation and 
not on the technicalities of the law. For these, 
and many other reasons, arbitration can be a useful tool for resolving disputes. However, it 
can also pose traps for the unwary.

First, it is important to understand the 
difference between arbitration and other types 
of alternative dispute resolution such as simple 
negotiations and mediation. In negotiations, the 
parties are in control of the process as well as the 
outcome. In mediation, the mediator controls 
the process, but the parties control the outcome. 
Arbitration is a more formal process. The parties can set the parameters of the arbitration 
before the hearing, but in the hearing it is the 
arbitrator-not the parties-who controls both 
the process and the outcome. Unlike negotiation 
and mediation, in which the parties agree on a 
solution in their mutual interest (or are free not 
to reach agreement), an arbitrator’s decision is 
valid regardless of whether or not it satisfies the parties. As a result, arbitration may be a 
more adversarial process than mediation or 

Disputes can end up in arbitration through a number of routes, some voluntary and some 
required by a court order or previous agreement. 
Arbitration is voluntary when two willing parties 
agree to the process as a means of resolving their 
dispute. This sometimes happens if the parties 
have already tried negotiation and! or mediation 
without success but are still looking for an 
alternative to litigation. If you are thinking about 
voluntarily going to arbitration, it can be helpful 
to consider whether the dispute is primarily 
about interests or about rights. If parties can 
resolve their dispute by reaching a compromise 
relating to their interests, then negotiation or 
mediation probably is a more desirable option 
than arbitration. However, if the parties believe 
their legal rights are at stake in the dispute, then 
arbitration is probably preferable.

Sometimes, a court may order parties to 
participate in nonbinding arbitration prior to trial. This means that the parties are not legally bound to comply with the arbitrator’s 
decision and may continue with litigation if they wish. Judges sometimes order parties 
to arbitration because it will give each side a sense of the strength of its case.

Some disputes are required to go to arbitration based on an arbitration clause. These clauses, which are found in contracts, state that disputes over the contracted 
matters must be resolved through arbitration. An arbitration clause might look 
something like this:

Arbitrations arising under an arbitration agreement are usually binding, unless 
otherwise provided in the arbitration clause. This means that the parties are legally 
obliged to comply with the arbitrator’s decision and have very limited rights to appeal 
the decision to a court.

If you have agreed to the terms of a credit 
card, insurance policy, or bank loan, it is likely 
that you have agreed to an arbitration clause. 
Often the arbitration clause is included in the 
fine print of an agreement. However, arbitration 
clauses do not have to be part of your initial 
agreement with a company. For example, credit 
card companies may include in your monthly 
statement an arbitration clause providing that 
continued used of the credit card constitutes 
agreement to the arbitration provisions. 
Arbitration clauses can even be retroactive, 
applying to disputes that arose before you 
agreed to the arbitration clause.

Although you are generally bound by any 
arbitration clause to which you agree, there 
may be some ways to negotiate such an agreement. For example, you may be able to argue 
that your case is not the type of dispute covered 
by the arbitration clause. Or, you may be able to 
argue that, because an arbitration clause gives one side a large advantage over the other, it is 
so unfair (usually referred to as “unconscionable” in legal terms) as to be invalid. If 
you think this is the case with an arbitration agreement you have entered into, talk 
to your lawyer, who will be able to help you understand the agreement and your 
options going forward.


IRA Funds

IRAs can be an important part of estate planning, especially for savvy investors and business owners. But be careful - mixing your IRA and your business interests too closely can cause big tax problems.
IRAs can be an important part of estate planning, especially for savvy investors and business owners. But be careful – mixing your IRA and your business interests too closely can cause big tax problems.


The IRS can “revoke” an IRA, and deny you all its tax benefits, if you use the funds for certain improper purposes. This rule applies not only to you, but also to actions by your family members and any business or trust that is controlled by you or your family.

What can’t you do? You can’t buy, sell, or lease property to or from an IRA; you can’t borrow money from an IRA or lend money to it; and you can’t make personal use of IRA property.

So, for instance, you can’t invest IRA funds in a business you own, you can’t lend money from an IRA to a relative to start a business, and you can’t use real estate owned by an IRA (such as rental property) for personal purposes (such as a vacation).

In fact, if your IRA owns rental property, you should avoid making any repairs or improvements yourself, because the value of your labor might be considered an improper contribution.

Two Colorado business partners found this out the hard way recently.

The two each used about $300,000 in their IRAs to buy 50% shares in a new corporation. The corporation then used the funds, plus a bank loan and a promissory note personally guaranteed by the partners, to buy a fire-safety company.

Oops! The personal guarantees meant that the partners were indirectly lending money to the IRA. As a result, the IRS revoked the IRA, and it charged the partners more than $500,000 in taxes and penalties.

If you’re considering putting IRA funds into “alternative” investments such as real estate, art, or shares in a private business, be careful and consult an expert first.

Consult a tax professional before attempting this.

Do It Yourself Wills Are NOT a Good Idea

portrait of a young man and older womanA growing number of websites now allow people to plug in information about themselves and write their own will. But doing so can be very dangerous and can lead to big problems, according to an independent review by Consumer Reports.

The magazine analyzed three such sites – LegalZoom, Rocket Lawyer, and Quicken WllMaker Plus – and ran the results by a law professor who specializes in tax and estate law. All three websites had a variety of problems, according to the study. The problems included:

Outdated information. Two sites applied federal tax rules that were already months out-of-date.

Not state-specific. The law of wills varies from state to state, but the programs didn’t take into account variations in state law.

No tax advice. None of the programs offered tailored advice on how to reduce taxes – a critical flaw. Incomplete. The websites often lacked provisions on how to handle business interests, electronic assets, trusts for children with special needs, domestic partnerships, multiple trustees, etc.

No flexibility. The websites frequently made arbitrary choices and didn’t allow bequests to be handled differently. And some added additional provisions to trusts without any warning.

The professor described one will produced by Rocket Lawyer as “primitive,” and another as “a mess.”

The magazine noted that LegalZoom allows you to pay extra money to receive attorney “support,” but when it contacted the company, it was told to type questions about arbitrary or missing provisions into a box and that these would be handled later in a hard copy of the will. According to the magazine, even though it paid the extra fee, this never happened.

Using a do-it-yourself website to write a will can be “like removing your own appendix,” according to the Consumer Reports article. There’s simply no substitute for a lawyer who can understand your wishes and goals, and provide legal and tax advice that’s suited to your specific needs.

Many Estates Can Save By Filing ‘Optional’ Tax Returns

tax-return-imageIf you refer someone to us, we promise to answer their questions and provide them with first-rate, attentive service. And if you’ve already referred someone to our firm, thank you!

A federal estate tax return doesn’t have to be filed every time someone dies. In fact, most estates never have to file one. However, a provision in the new “fiscal cliff” tax law may make it very advantageous to file an estate tax return if the deceased person is survived by a spouse – even if a return is not legally required.

Here’s why: Generally, when a person dies, his or her estate can give an unlimited amount to a surviv­ing spouse. After that, if the persons bequests (plus large lifetime gifts) total more than a certain “exemp­tion amount,” then an estate tax is due. For 2013, the exemption amount is S5.2S million.

Traditionally, the exemption amount applied separately to each spouse. So if a husband died first, his estate could use his exemption amount, and when his wife died later, she would get her own exemption amount.

But under a change in the law starting in 2011, if the first spouse to die doesn’t use all of his or her ex­emption amount, the difference can be passed along to the other spouse. (The 2011 law was temporary, but the new “fiscal cliff” law makes it permanent.)

So suppose a husband dies and doesn’t use any of his S5.25 million amount (because he leaves everything to his wife). When the wife dies, her exemption amount will be her own $5.25 million plus the $5.25 million that the husband didn’t use. So instead of being able to leave $5.25 million tax-free to her heirs, she can leave $10.5 million tax-free – a potential sav­ings of millions of dollars.
However, this only works if the husband’s estate filed an estate tax return and elected to pass the exemption amount on to his wife. If the husband’s estate didn’t file a return (because it wasn’t legally required), then all the potential tax savings are lost.

This means that it’s almost always a good idea to file an estate tax return for anyone who dies and is survived by a spouse.

Even if it seems highly unlikely that a surviving spouse will be worth more than $5.25 million when he or she dies, it’s still a good idea to file a return, because Congress could always change the exemp­tion amount. In fact, if not for the “fiscal cliff” law, the exemption amount this year would be only $1 million.

Keeping Your Will Up-to-Date – Buying or Selling Property

Last Will

After you have spent many hours, and probably some money, drafting your estate plan, remember that life doesn’t stand still. Your circumstances are to change and there is a pretty good chance you will buy or sell property after your estate plan is in place. It is vital to make sure that you account for these changes in your estate plan. However, doing so isn’t as easy as simply crossing out a paragraph or adding another sheet of paper. You must take certain steps to ensure that your property is accounted for, legally, in your will or estate plan.

An amendment to a will is called a codicil. You formally execute a codicil using the same formalities as you would for a will (witnesses and signature requirements often apply to codicils, for example). The same competency and undue influence standards that apply to the execution of a will also apply to codicils. Courts want to ensure that your will is not altered after it is in place due to nefarious behavior or fraud. Of course,

When you write a new will, be sure to include the date that it was signed and executed, and put in a sentence that states the new will revokes all previous wills.

It’s vital such codicils be dated so the court can tell whether they were made after your will was executed. After a codicil is properly drafted and executed, it should be kept with the will.

If changes are substantial—-for example, if you have sold all the real estate you owned in one state when you wrote your will and now own a condo on the beach across the country—it may be advisable to write a new will entirely.

Your new will should indicate that it revokes the old one. When you write a new will, be sure to include the date that it was signed and executed, and put in a sentence that states the new will revokes all previous wills. Otherwise, a court may rule that the new one only revokes the old where the two conflict—which could cause some serious problems.

If you fail to update your estate plan to account for changes in the property you own, the courts will give as much effect to your old will as possible. Some changes may be accommodated by the law, regardless of what your will says. For example, the courts will not simply let your new home remain without an owner because you didn’t draft a codicil to account for the home’s distribution upon your death. To have more control over this unaccounted for property, you may want to include a “safety net” in your will to plan ahead for unaccounted assets—called the residuary estate. The residuary estate is covered by a paragraph in most wills that says you leave all assets not specifically disposed of elsewhere to your spouse or a charity or institution of your choosing. If you actually want that new beach house to go to your children and not your alma mater, check in with your lawyer on a regular basis (say, once a year) for an “estate plan” check­up.

Drafting a new estate plan, adding a codicil, or using one of the many other estate planning tools your lawyer may suggest is the best way to ensure your loved ones are taken care of in the way you hoped.