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Irrevocable Letter Of Direction (LOD)

November 23, 2015 • 2 min read

An irrevocable letter of direction, also known as, a letter of direction gives the recipient-specific rights regarding the sender or writer’s personal finances.

What is the purpose of a letter of direction?

Nearly any individual can write a letter of direction, albeit the correct procedures have been adhered to. An individual can write a letter of direction to their bank, instructing them to close a personal account on their behalf. This gives the bank authority to close the chosen account and transfer the leftover funds to the appointed bank account.

A letter of direction can also be used between two or more business partners. If one business partner decides to revoke certain rights, he or she can write a letter of direction, diverting their responsibilities and rights to another partner within that business.

How to write a letter of direction?

One thing that a writer of a LOD should consider is that it’s not legally enforceable on the recipient. To ensure a smooth transition within a business or that of financial assets, the writer should include the following in their LOD:

Clearly state the intention of the LOD
State who the letter is from, and who it is directed to
Keep any unnecessary details out of the LOD to prevent confusion
Clearly outline the reasons for the letter, and what are the repercussions thereof
Be concise and to the point
Always sign off on a letter

There are dozens of great examples that you can read through in order to craft the perfect letter of direction.
Why is a LOD written?

The reasons for a LOD will differ for each situation, but in some instances, it’s simply written to resolve any disputes, assist with personal finances, or ensure the transition of authority and rights from one person to another.

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