While it is not something we like to think about, there is always a chance that we could pass on unexpectedly. Injuries and illnesses lead to countless premature deaths each year; and, for those who do not have an estate plan, an untimely passing can leave many important questions unanswered. This includes questions pertaining to care and financial responsibility for pets.
If you are among the pet owners who contribute to the United States’ $62 billion-plus pet industry, providing for your pet’s needs and long-term care is undoubtedly an important component of your estate planning goals. So, what options are available? How do you choose the best option for your pet and your loved ones?
Using a Pet Trust to Provide for Your Pet’s Care and Needs
One of the most common methods of providing for a pet’s care and financial needs after your death is to establish a pet trust. With regard to the fundamentals, a pet trust is just like any other estate planning trust. As a result, establishing a pet trust involves:
- Preparing the necessary documentation to form a legally recognized trust;
- Naming the beneficiary(ies) of the trust (your pet(s) initially, but see the discussion of “remainder beneficiaries” below);
- Naming the trustee(s) of the trust (the person or persons who will be responsible for managing the trust’s assets after your death); and,
- Funding the trust with assets (commonly cash, securities, or an insurance policy) from your estate.
Special Considerations for Pet Trusts
However, there are some unique aspects involved in forming a pet trust. For example, although all fifty US states now recognize pet trusts, different states impose differing limitations. While some states allow pet trusts to exist for the pet’s lifetime, others cap the duration of pet trusts at 21 years. If you are seeking to provide for the care of a horse or other animal with a life expectancy longer than 21 years, you will of course want to make sure that you trust survives as long as necessary.
Pet trusts are also unique from other estate planning trusts in that they must name a caretaker who will be responsible for ensuring that the trust’s assets are used for your pet’s care in accordance with your desires. Pet trusts enjoy the flexibility of other types of trusts in that the grantor (you, the pet owner) can impose restrictions that survive the grantor’s death. While all trustees have a fiduciary obligation to manage trust assets in order to maximize value for beneficiaries, with a pet trust you need to make sure that the caretaker’s obligations are clearly established as well.
Finally, with a pet trust it is also important to name a “remainder beneficiary.” In short, in addition to planning for your death, you need to plan for your pet’s death as well. If your pet dies before the trust’s assets are exhausted (which is generally desired), who will be entitled to receive the remaining benefits assets from the trust?
Funding Your Pet Trust
When it comes to funding your pet trust, there are a number of issues you need to consider. First and foremost, how much money will be needed to provide your desired level of care and comfort for the remainder of your pet’s lifetime? While there are now several well-known stories of celebrities leaving several million dollars in pet trusts for their long-time companions (and this is certainly an option that you have), many people establish modest pet trusts that are designed simply to help their loved ones cover the costs of food, basic supplies, and veterinary expenses.
Second, you need to decide what type(s) of assets to transfer to the trust. Will you leave cash? Investments? Do you have (or will you purchase) an insurance policy tailored to covering your pet’s long-term needs? Here, too, there are several options available, and there are a variety of tax and other considerations that should all factor into your decision.
Initial Considerations for Establishing a Pet Trust
With this background, if you are thinking that a pet trust may be something that you want to include in your estate plan, here is a simple list of questions you can use to begin thinking through the issues and gathering the information your attorney will need in order to establish the trust:
- How much are you spending on your pets’ essential needs each year?
- How much do you want to leave for luxuries and other non-essential expenses?
- Who do you want to name as caretaker for your pets? Is he or she willing and able to take on this responsibility?
- Who do you want to name as trustee to manage your trust’s assets?
- Who do you want to name as the trust’s remainder beneficiary(ies)?
- Do you want to require veterinary check-ups at regular intervals?
- Do you want to include provisions for your pets’ offspring, if any?
- What do you want to be done with your pet’s remains?
- If you leave a certain portion of your estate to a pet trust, how will this impact the remainder of your estate plan?
Alternatives to a Pet Trust
While pet trusts have grown in popularity in recent years, they are not the only option available to pet owners seeking to provide for their pets’ care after their death. Some of the other options include:
- Using Your Will – Since pets are considered property in the United States, you can designate a beneficiary to receive your pet in your will. Additionally, while you cannot use your will to leave money to your pet, you can leave money to the human beneficiary who you trust to take responsibility for your pet’s health and happiness after your death. Your will can even include guidelines for your pet’s care; though, unlike a trust, you cannot specify how funds distributed through your will must be used.
- Using Life Insurance and Other Estate Planning Tools – In some circumstances, a specific pet trust may not be necessary, but you may still want to include greater provisions for your pet’s care than you can include in your will. If this is the case, you can consider using life insurance, revocable trusts, and other estate planning tools to provide for your pet’s future care.
- Finding a Pet Sanctuary – Finally, when planning for your pet’s future in your absence, it is important to make sure that the caretaker you choose is comfortable taking on what could be a years-long, or even decades-long, obligation to care for an animal they did not originally choose to adopt. If you cannot find a suitable caretaker, a pet sanctuary may be another option worth considering. Of course, you could establish a pet trust in conjunction with choosing a pet sanctuary to ensure that your pet is able to live comfortably without concern for the costs of ongoing care.
Speak with an Estate Planning Attorney at Jiah Kim & Associates
If you would like to learn more about providing for your pet’s care after your death, we encourage you to contact us for an estate planning consultation. To speak with one of our attorneys at a time that is convenient for you, call (646) 389-5065 or schedule an appointment online today.
This blog post is written for educational and general information purposes only, and does not constitute specific legal advice. You understand that there is no attorney-client relationship between you and the blog publisher. This blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.