Many of you have important members of your family which have been forgotten when you put together your estate plan — your pets. Do you have a Plan for your pets upon your passing? Who will take care of them? Are there sufficient funds set aside to provide for the best care for your pets? This Client Alert will introduce you to this process and may assist in answering these questions.
Until recently, attempted gifts in favor of specific animals failed for various reasons. However, under recent developments in the modern law, gifts to specific animals are being recognized as valid gifts. Below are a few options on how to make gifts to your pets. (Please note, this provides a general overview of the structures, and there may be minor alterations based on your local law.)
Non-Trust Planning Options
If you have someone you trust to take care of your pet, you may choose to make an outright gift of your pet to that person, along with a specific sum for your pet’s care. The benefit of this plan is that it is simple and less costly. However, this plan will only work if you have someone that you fully trust will use the funds for taking care of your pet.
If you are not able to find a good caregiver, another option is to make an outright gift of your pet to your veterinarian or a shelter. The benefit of this plan is that this is also a simple and an inexpensive option. However, your pet will most likely live out his or her life in the clinic or shelter, and not with a family. You may try to arrange with the clinic or shelter for adoption to a good home, but this is not guaranteed.
You may also provide a monetary gift to a formal life care shelter (such as Best Friends Animal Sanctuary in Kanab, Utah, or other local centers in your area) for the care of your pet. The benefits of this plan is that these shelters do not euthanize and they generally provide good care in the hands of loving volunteers. However, this plan is a bit more expensive. The payments to these shelters depends on a variety of factors (such as the type and age of the animal, and the age of the owner).
If you do provide for your pets in your estate plan, you should also include pet care provisions in your Durable Power of Attorney and your Living Trust to authorize your agent/trustee to spend funds for the care of your pet.
The Pet Trust
A Pet Trust can be structured as a standalone trust solely for the benefit of your pet or as a “springing trust” (this means that the pet trust will be created upon your death) in your Will or your Living Trust. It can also be structured as a revocable or irrevocable trust, and be drafted to take effect immediately (i.e., during your life), or upon your passing.
The benefit of a pet trust is that it is more predictable, and you are able to tailor the plan to match your needs and desires. However, it can be more expensive to administer. There are also many things to consider before you decide on the final structure.
For example, if you structure the pet trust through your Living Trust or set up a standalone pet trust, you will avoid the probate process. On the other hand, if the pet trust is to be formed upon your passing and through a Will, the Will must be probated. This means that the pet trust can only be created with the Court’s approval, which may lead to delayed funding of the trust. Therefore, it is important to ensure that there is an immediate, alternate funding source for the care of your pet, by tying funding to a non-probate asset (such as a pay-on-death account or life insurance naming the trustee as the beneficiary).
In any pet trust you will need to nominate a trustee and the pet care provider. The caregiver is the true “beneficiary” of the trust, and has the right to enforce the trust. Therefore, you should choose your pet care provider wisely, as the pet care provider will assume responsibility for your pet. He/she must understand the duties and responsibilities of taking care of your pet, and should have a good relationship with your animals.
You may also want to appoint a “Pet Care Panel” and/or a Trust Protector. The Pet Care Panel can be an advisory board comprised of your friends, relatives, or your veterinarian, and can provide oversight and instruction to the pet care provider. The Pet Care Panel would have the power to set the standard of care for your pet, make health care decisions (surgery, euthanasia), choose the caregiver (or alternate caregiver), and to set the caregiver’s salary (if any). The Trust Protector is a neutral, trusted party (such as your attorney) with the power to amend/correct the trust document (for example, in the event there is a change in your pet’s situation or to comply with a change of the law), remove/replace trustees, appoint the Pet Care Panel, and the right to enforce the trust in court.
It is important that you take into consideration how much to leave to the trust. If you leave too little, it may not be enough to take care of your pet for his/her lifetime. But if you leave too much, this trust could be contested by your other heirs. In order to avoid such contests, you could include a “poison pill” provision, which basically would disinherit the objecting beneficiary(ies).
Finally, there may be tax consequences (income tax, gift tax, estate tax), based on the structure of your trust, which may also affect your decision on which structure to use.
As you can see, there are many factors to consider when creating a pet trust.
If you would like to learn more about how you can plan for your pets, please contact us.