PowerPoint Presentation [TTU
SALDF [Feb. 13, 2013]
PowerPoint Presentation [Mortiz Estates and Trusts Association] [April 4, 2012]
Estate Planning for Non-Human Family Members [updated June 2, 2014.
Estate Planning for Non-Human Family Members [NYSBA version of 12/5/2009].
Max's Taxes: A Tax-Based Analysis of Pet Trusts, 43 Univ. Richmond L. Rev. 1219 (2009) (co-authored with Jonathan P. Wilkerson)
Your Trust-worthy Pet, Legal Times, March 10, 2008 [2 page summary]
Estate Planning for Pet Owners (Phoenix Landing Foundation) (Feb. 2008) [annotated with the special concerns of parrot owners].
Pet Animals: What Happens When Their Humans Die?, 40 Santa Clara L. Rev. 617 (2000) [detailed law review article with extensive historical information].
A pet trust is legal technique you may use to be sure your pet receives proper care after you die or in the event of your disability.
You (the “settlor”) give your pet and enough money or other property to a trusted person or bank (the “trustee”) who is under a duty to make arrangements for the proper care of your pet according to your instructions. The trustee will deliver the pet to your designated caregiver (the “beneficiary”) and then use the property you transferred to the trust to pay for your pet’s expenses.
There are two main types of pet trusts.
The first type, called a “traditional pet trust,” is effective in all states. You tell the trustee to help the person who is providing care to your pet after you die (the beneficiary) by paying for the pet’s expenses according to your directions as long as the beneficiary takes proper care of your pet.
The second type of pet trust, called a “statutory pet trust,” is authorized all states. A statutory pet trust is a basic plan and does not require the pet owner to make as many decisions regarding the terms of the trust. The state law “fills in the gaps” and thus a simple provision in a will such as, “I leave $1,000 in trust for the care of my dog, Rover” may be effective.
Many pet owners will prefer the traditional pet trust because it provides the pet owner with the ability to have tremendous control over the pet’s care. For example, you may specify who manages the property (the trustee), the pet’s caregiver (the beneficiary), what type of expenses relating to the pet the trustee will pay, the type of care the animal will receive, what happens if the beneficiary can no longer care for the animal, and the disposition of the pet after the pet dies.
You may create a pet trust either (1) while you are still alive (an “inter vivos” or “living” trust) or (2) when you die by including the trust provisions in your will (a “testamentary” trust).
Both options have their advantages and disadvantages.
An inter vivos trust takes effect immediately and thus will be functioning when you die or become disabled. This avoids delay between your death and the property being available for the pet’s care. However, an inter vivos trust often has additional start-up costs and administration fees.
A testamentary trust is the less expensive option because the trust does not take effect until you die and your will is declared valid by a court (“probating the will”). However, there may not be funds available to care for the pet during the gap between when you die and your will is probated. In addition, a testamentary trust does not protect your pet if you become disabled and unable to care for your pet.
Funding means to transfer money or other property into your trust for the care of your pet. Without funding, the trustee will not be able to provide your pet with care if you become disabled and after you die.
You need to consider many factors in deciding how much money or other property to transfer to your pet trust. These factors include the type of animal, the animal’s life expectancy (especially important in case of long-lived animals), the standard of living you wish to provide for the animal, the need for potentially expensive medical treatment, and whether the trustee is to be paid for his or her services. Adequate funds should also be included to provide the animal with proper care, be it an animal-sitter or a professional boarding business, when the caregiver is on vacation, out-of-town on business, receiving care in a hospital, or is otherwise temporarily unable personally to provide for the animal.
The size of your estate must also be considered. If your estate is relatively large, you could transfer sufficient property so the trustee could make payments primarily from the income and use the principal only for emergencies. On the other hand, if your estate is small, you may wish to transfer a lesser amount and anticipate that the trustee will supplement trust income with principal invasions as necessary.
You should avoid transferring an unreasonably large amount of money or other property to your pet trust because such a gift is likely to encourage your heirs and beneficiaries to contest the trust. If the amount of property left to the trust is unreasonably large, the court may reduce the amount to what it considers to be a reasonable amount.
If you create an inter vivos pet trust, that is, a trust which takes effect while you are alive, you need to fund the trust at the time it is created. You may also add additional funds to the trust at a later time or use the techniques discussed below.
If you create a testamentary pet trust, that is, the trust is contained in your will and does not take effect until you die, then you need to fund the trust by a provision in your will or by using one of the techniques discussed below.
Direct transfers: If you create your trust while you are alive, you need to transfer money or other property to the trustee. You need to be certain to document the transfer and follow the appropriate steps based on the type of property. For example, if you are transferring money, write a check which shows the payee as, “[name of trustee], trustee of the [name of pet trust], in trust” and then indicate on the memo line that the money is for “contribution to [name of pet trust].” If you are transferring land, your attorney should prepare a deed naming the grantee with language such as “[name of trustee], in trust, under the terms of the [name of pet trust].”
If you create the trust in your will, you should include a provision in the property distribution section of your will which transfers both your pet and the assets to care for your pet to the trust. For example, “I leave [description of pet] and [amount of money and/or description of property] to the trustee, in trust, under the terms of the [name of pet trust] created under Article [number] of this will.”
Pour over will provision: If you create your pet trust while you are alive, you may add property (a “pour over”) from your estate to the trust.
Life insurance: You may fund both inter vivos and testamentary pet trusts by naming the trustee of the trust, in trust, as the beneficiary of a life insurance policy. This policy may be one you take out just to fund your pet trust or you may have a certain portion of an existing policy payable to your pet trust. This technique is particularly useful if you do not have or anticipate having sufficient property to transfer for your pet’s care. Life insurance “creates” property when you die which you may then use to fund your pet trust. Be sure to consult with your lawyer or life insurance agent about the correct way of naming the trustee of your pet trust as a beneficiary.
Pay on death accounts, annuities, retirement plans, and other contracts: You may have money in the bank, an annuity, a retirement plan, or other contractual arrangement which permits you to name a person to receive the property after you die. You may use these assets to fund both inter vivos and testamentary trusts by naming the trustee of your pet trust as the recipient of a designated portion or amount of these assets. Be sure to consult with your lawyer, banker, or broker about the correct way of naming the trustee of your pet trust as the recipient of these funds.
The selection of the caregiver for your pet is extremely important. Here are some of the key considerations:
Yes. You should name at least one, preferably two or three, alternate caregivers in case your first choice is unable or unwilling to serve as your pet’s caregiver. To avoid having your pet end up without a home, consider naming a sanctuary or no-kill shelter as your last choice.
Here are some examples of the types of concerns about which you may wish to provide instructions:
The trustee needs to be an individual or corporation that you trust to manage your property prudently and make sure the beneficiary is doing a good job taking care of your pet. A family member or friend may be willing to take on these responsibilities at little or no cost. However, it may be a better choice to select a professional trustee or corporation which has experience in managing trusts even though a trustee fee will need to be paid.
Yes. You should name at least one, preferable two or three, alternate trustees in case your first choice is unable or unwilling to serve as a trustee.
Yes. Serving as a trustee can be a potentially burdensome position with many responsibilities associated with it. You want to be sure the persons you name as your trustees will be willing to do the job when the time comes.
You should name a “remainder beneficiary,” that is, someone who will receive any remaining trust property after your pet dies. Note that it is not a good idea to name the caregiver or trustee because then the person has less of an incentive to keep your pet alive. Many pet owners elect to have any remaining property pass to a charitable organization that assists the same type of animal that was covered by the trust.
If no property remains in the trust, the trustee will not be able to pay for your pet’s care. Perhaps the caregiver will continue to do with his or her own funds. If the caregiver is unwilling or unable to do so, you should indicate in your pet trust the person or organization to whom you would like to donate your pet.
You should consult with an attorney who specializes in estate planning and, if possible, who also has experience with pet trusts. You may find it helpful to give your attorney a copy of this article.
FAQs revised on Saturday, July 2, 2016.
In publishing these materials, the author is not engaged in rendering legal, accounting or other professional service. If legal advice is required, the service of a competent professional should be sought.
© 2016 Gerry W. Beyer