'Failed to generate a user instance of SQL Server due to a failure in starting the process for the user instance. The connection will be closed.'
This problem occurs when the user uses remote desktop and logs into the system for the first time. If the user logs in at first locally and then uses remote desktop the problem doesn't occur.
Microsoft describe the problem in the article
It is enough to request them to send you a link for the fix (windows update) and wait a few hours. The fix cannot be downloaded directly because of need of additional testing. But it works fine for me.