Pet Trust
Taking Care of Loyal Friends
Are you a “pet owner” or a “pet parent”? Do you own your dog or cat-or does your dog or cat own you? Have you ever bought a birthday present for your pet or made up a song about her? Does your pet sleep on your bed? Do you schedule play dates for your dog? Have you ever made a decision on where you live or vacation based in great measure on whether dogs are allowed?
If you answer yes to any of these questions, your pet is more a beloved family member than a possession.
According to an American Pet Product Manufacturer’s Association National Pet Owners Survey, Americans spent over $40 billion in 2007 buying and caring for pets, including an estimated 88 million cats and 75 million dogs. These expenditures exceed the gross domestic product of more than half the countries in the world. Some of these billions are spent on such consumer items and services as:
- Premium dog walking, luxury doggy daycare and spas, fancy foods, boutique clothing and jewelry
- Pet psycho-therapy, chiropractic and acupuncture
- Animal cosmetic procedures, including canine braces to fix crooked teeth; and Neuticles ©, a testicular implant that makes neutered pets look anatomically correct
- Medical procedures including cancer surgery and expensive drugs. Operations costing $5,000 to $15,000 and more are not unusual
Making Difficult Decisions About Pets
People who have made difficult end-of-life decisions about humans can be faced with similar decisions about pets.
Will a treatment or operation add quality or merely extend life? Cost should not be a factor, but it often is. When you’re gone, will anyone care enough about your pet to spend the money for cancer surgery or expensive drugs using the same criterion you would use? Wouldn’t you want to know that, medically and in other ways, your pet is being provided for the way you would wish?
This is why your pet merits a few paragraphs in your estate plan. To ensure that your desires relating to pet care have teeth, you must comply with the requirements of your state for a valid and enforceable pet trust. More than 3/4th of all states have statutes providing for pet trusts. A pet trust may give you peace of mind that your cats won’t end up homeless, friendless, caged or euthanized. Typical pet trusts, whether established under statute or not:
Typical Pet Trusts
1. Identify the pets who are lifetime beneficiaries after you die or become incapacitated. With the right language, you can cover pets you acquire in the future, as well as your current ones, so that even if they are not named in your trust, your new pets will still be beneficiaries. Identification of your pet beneficiaries also means ensuring that the right animals benefit from your planning. Photos or microchip implanting may be recommended to prevent misidentification or outright fraud.
2. Set aside a suitable amount, anywhere from $5,000 to $50,000 or more. The amount required to properly fund a pet trust varies, depending on the age of the animal beneficiaries, the type of care you specify and the compensation level, if any, of both the trustee and the caretaker. A court may reduce the amount of money transferred to a pet trust if it determines that the amount substantially exceeds the required use. According to a poll by Lawyers Weekly USA, the average amount used to fund a pet trust is $25,000.
3. Select a human or corporate trustee who will keep pet trust money invested during your pets’ lifetime and dole it out to the caretaker for the pets’ care. Always select contingent trustees in the event that the trustee you select is unable or unwilling to act. Your pet cannot act as trustee.
4. Select a caretaker. If you select an individual, also list contingent ones in case the first selection can’t or won’t act. Talk to the caretaker about willingness to take your pets.
If you lack a suitable individual to take care of your pet, you or your future trustee can pick a nice pet retirement home or resort. There are numerous professional pet caretakers, exemplified by Merry Lynn Pet Estates. Pet Estates, located on 7 acres in Melrose, New York, offers your pet warm meals and heated beds (not cages) in the serenity of their own private rooms. Daily stimulation includes private walks along the hills and pond, ball throwing games, a boat ride or swimming in the pond. Quiet times include soothing petting and personal interaction, and message therapy is also an option. The care is 24/7. Much different from a sad looking chain-link fence kennel.
5. Specify a compensation amount or fixed gift for both the trustee and the caretaker and contingent on taking care of the pet.
6. Consider tax issues. If investment earnings are retained in the pet trust, the trust will pay income taxes. If paid out in the form of compensation to the trustee or caregiver, it is ordinary income to the recipient, though expenses are most likely deductible.
7. Select an “enforcer”, if you feel that one is necessary, who has the authority to physically check up on the pet and/or audit the trust’s finances. Make sure that person’s expenses are also covered.
8. Leave a detailed plan of care including such elements as a preferred veterinarian, any medical conditions of the animal, feeding (brands, amounts and supplements), grooming needs and other idiosyncrasies.
9. Name a beneficiary who will receive the assets remaining in the pet trust after the pet dies. The remainder beneficiary can either be people or charities. Pet trusts are part of your taxable estate and cannot be regarded as a charitable gift, even if a charity eventually ends up with whatever is left after both you and your pets are history (assuming the pets survive you). Consider whether the trustee or caretaker have a built-in conflict of interest. Do they stand to inherit when the dog dies?
10. Direct ultimate disposition of the pets remains after the pet dies. Cremation? What to do with ashes?
Generally, a pet trust must terminate when no living animal is covered by it. A pet trust can also be set up so that if you become incapacitated and relocation to a skilled care facility is required — you and your pet remain together if possible. Last, most state pet trusts exempt the trust from the medieval Rule Against Perpetuities, but if your state doesn’t and you have the type of pet that is likely to live for more than 21 years (i.e. a tropical bird) — then this last proviso must be properly handled by an attorney.
If you're not comfortable with the idea of establishing a pet trust, don't worry. Not everyone with a beloved pet needs a pet trust. My chocolate lab Chloe doesn’t need a trust. My only planning dilemma is deciding how to establish rotating custody of her with fair visitation rights to her many devotees.
Types of Trusts We Establish:
- Revocable/Irrevocable Trust
- Irrevocable Life Insurance Trust
- Supplemental Special Needs Trust
- Generation Skipping Trust
- Charitable Trusts
- Credit Shelter/Applicable Exclusion Amount Shelter Trust
- Pet Trust
- Estate Freeze Trust
- Qualified Personal Residence Trust (QPRT)
- Qualified Domestic Trust
- Life Partner and LGBT
