Many families today view their pets as part of the family. Sometimes the pets rank even higher than children and grandchildren. As part of estate planning, a growing number of people desire to ensure for the continued care and safety of their pets using trusts. Every state in the U.S. now has a statute that authorizes pet trusts, although the restrictions vary.
Pet Trusts often are incorporated into a person's will or revocable (or "living" trust), or they can stand on their own. As with other trusts, someone is appointed as the trustee, and the trustee is financially responsible for the pet's care. At a minimum, a pet trust should address the following issues:
- The Trust should appoint a custodian for the pet (or pets). The pet owner should consult with the custodian before preparing the trust and confirm that the custodian will be willing and able to care for the pet. The trust should provide for the selection of alternate custodians if the initial custodian (or a successor) fails or ceases to serve. The custodian can be the same as the Trustee; however, keep in mind that, in such a case, there will be less oversight over the care of the pet. Remainder beneficiaries, discussed below, likely will be more concerned over the financial aspects of the Trust, rather than the pet's well-being. The best practice would be to have different people serve as Trustee and custodian.
- The Trust will need funding to care for the pet. The funding can come from the client's estate, trust, or even life insurance. Make sure that the trust includes adequate funding to care for the pet (or pets) during its (or their) lifetime(s). Do not put the financial burden on the custodian.
- Where will the custodian and the pet live? If the custodian rents an apartment or a house, will the pet be permitted to stay there? If the Trust has enough resources, a provision providing for housing expenses, or even the ownership of a house, will provide added comfort.
- The Trust should provide for the care and maintenance of the pet. A generic distribution standard such as "care, maintenance, and support" is typical language for "people" trusts, and rather broad. If desired, the owner can provide additional guidance for what expenses should be covered, such as veterinary and hospital expenses, food, grooming, and items such as bedding and toys. In addition, the Trust may provide for services such as pet sitting.
- As a way to oversee the custodian and confirm the well-being of the pets, the custodian should be required to arrange for at least annual veterinary care and checkups. The trustee should be required to review reports, or otherwise inquire as to the pet's health at least annually, if not more often. The Trust may designate a particular veterinarian, but if it does, it should provide for the selection of an alternate.
- Sadly, most pets do not live very long when compared with humans. Yes, there are some exceptions, such as a few types of exotic birds. The Trust should provide the terms for euthanasia, especially as the death of the pet (or the surviving pet) will cause the Trust to terminate.
- To incentivize the custodian, the Trust should provide for compensation for the custodian. The amount of compensation depends on the circumstances, and what else the custodian receives from the Trust. For example, if the Trust provides for housing, then the compensation may be reduced.
- Once the pet or surviving pet passes away, the Trust must provide for the disposition of any remaining assets. Generally, the remainder beneficiaries will be entitled to trust accountings during the life of the pet, unless the Trust provides otherwise.
- Caution should be taken to guarantee the pet's identity. Microchips are an easy solution, although there is at least one story of microchips being removed from a dog, so it is possible that even a microchip will not stop a nefarious pet caregiver. Now the ability to clone a pet adds even further vulnerability.
Pet trusts can be subject to challenge in court, so they need to be carefully drafted. For example, the real estate tycoon Leona Helmsley, in her estate plan, tried to leave $12 million for a trust for her dog, Trouble. That gift was challenged, and ultimately the court reduced the gift to Trouble's trust.
The important takeaway here is that planning for pets is very possible. Planning can be done with a will, or a trust, or even another arrangement outside of these two most common estate planning documents.