Wills, Trusts & Probate

Estate Planning For Pets

Estate planning is the process of planning the distribution of one’s assets to heirs, or beneficiaries, effective at the time of one’s death. Many of you may instantly associate “heirs or beneficiaries” with human beings, but this is not always the case. It has become increasingly popular for people to assign assets to another designated party, namely Fido or Fluffy.

Some people adore their pets so much that they consider them family members, and they want to make certain that their pets are properly cared for in the event that they become incapacitated or pass away.  Fortunately, there are several options that we incorporate here at Amaral & Associates, P.C. for pet owners who wish to add pets into their estate plan.

Wills

While often a primary vehicle of estate planning, wills present some significant disadvantages in planning for pets. Unlike human beings, pets cannot care for themselves during the probate period before a will takes effect. Pets need care, food, water, and shelter, and could be endangered if left abandoned for even short periods of time. Additionally, a will is ambulatory and only becomes effective upon the death, not incapacity, of the pet owner.


Trusts

As estate planning for pets has become more and more common and some states have adopted laws, such as those incorporated into the Uniform Probate Code and the Uniform Trust Code, as well as a few independent pet trust statutes. States differ in specific terms regarding pets in trusts and the overall concept of designating a pet as beneficiary in a trust raises some issues.

Most laws treat pets as property and one cannot leave property or money to other property. Additionally, a traditional trust that designates a pet as beneficiary would most likely fail, lacking a standard for measuring life. (Because trusts cannot last forever, they require a measuring life, typically that of a person.) As a pet is not a person, the measuring clock of the trust cannot start and the trust cannot take effect. Yet, specific long-term trust planning vehicles are available to pets.


Honorary Trust

Prior to 1990, honorary trusts were the only type of trusts used for the long term care of a pet. Originally, such a trust was created in honor of a pet in hopes that the courts would uphold it. Unfortunately, unsympathetic judges, attorneys and family members may render these trusts null and void if they choose not to carry out the wishes of the pet owner. Also, there are limits to when and where this trust can be established. If the pet owner establishes this trust in a state that does not recognize it as legal, the money reverts back to the original estate, defeating the purpose of the trust.


Caregiver Trust

The easiest way to ensure that a pet will receive proper care is to establish an enforceable living trust (also known as an inter vivos trust) or a testamentary trust. These trusts assign a human beneficiary and cover the pet’s expenses as long as the beneficiary is taking proper care of the pet.

The main difference between living and testamentary trusts is that a testamentary trust is enforceable only upon the death of the pet owner, whereas a living trust is enforceable while the owner is still alive but unable to care for the pet. A living trust takes effect immediately upon the owner’s death or disability, avoiding any time lapse between the owner’s death and subsequent functioning of the trust. While there are additional start-up costs and administration expenses with a living trust, it can ensure that your pet will be in good hands.


Who's Involved In A Living Trust

In a living trust, a trustee is charged with overseeing the investment and administration of trust assets and a caregiver is responsible for the care of the pet. In many cases, a trust protector or committee is responsible for inspecting the care of the animal. Finally, a remainderman (a person or entity) ultimately receives the trust assets after the pet’s death, as seen in Exhibit 1.

Exhibit 1: Asset Flow of a Pet Trust

Pet Owner » Assets to Fund Trust to Caregiver » Pet& » Balance at Death of Pet » Remainderman

As the caregiver ultimately ensures the well-being of the pet, pet owners should seriously consider this selection. Owners should also name alternative caregivers in the event that the primary choice cannot serve for the duration of the pet’s life. The pet owner should also clearly identify the animal to be covered by the trust in order to prevent fraud.


Tax Implications

As with any other trust, tax implications arise even with a pet trust that is valid under state law. As the legality of these trusts varies from state to state, pet owners should consult with their tax advisors when considering including pets in their estate plans.


Precautionary Planning

Unlike other assets, pets are living things that require special care. However, animals are not humans and cannot speak for themselves. A few precautionary planning tips for pet owners include:

• Ensure that neighbors and family members are aware of any pets you have in case an emergency arises;
• Take steps to protect the pet, such as carrying a wallet alert card or posting “in case of emergency” stickers on windows;
• Designate one or two temporary caregivers to help in case of an unexpected event. These caregivers can serve informally until the provisions in a trust or will are activated (the latter requiring a probate waiting period). This will help ensure the pet receives the care and attention it needs in a timely way.

Other planning Techniques

Aside from trusts and wills, other planning techniques for pets are available. A pet owner can:

• Name a caregiver in a durable power of attorney to cover incapacity. In this way, the pet owner can designate someone else as attorney in fact or agent, who is then able to make decisions on behalf of the pet owner;
• Make arrangements with a pet retirement home or adoption service to prevent the pet from being euthanized. Both for profit and non-profit retirement homes are available. The pet owner should visit the home prior to making legal preparations to ensure that the home is exactly what the pet owner wants for the pet;
• Animal placement services work to find a new home for the pet when the owner can no longer provide care. If the service cannot find a new home, the pet may be placed into a foster care program;
• For more information, visit The American Society for the Prevention of Cruelty to Animals website www.aspca.com.