LAW FIRM BLOG
April 03, 2020
One of the goals of estate planning is to provide for your loved ones, and for many of us, “loved ones” includes our pets. Like countless pet owners, you may be concerned about what will happen to them at your death or incapacity. While you can always ask a friend or relative to care for your pet, they aren’t legally obligated to unless you establish an estate plan. The specific estate planning method you use will depend on your state laws, your pet’s needs, your goals and financial resources.
Your pet is an important member of your family. But in the law, pets are “personal property,” much like your car. Yes, even though you consider your animal companion as a devoted friend, legally, your pet is not given the status of a person. That’s why you can’t leave money directly to your pet. You can mention your pet in your will, but there’s no guarantee your wishes will be followed. If want to ensure your companion is always cared for, a “pet trust” could be just the solution. You can designate caretakers, monthly allowances for animal care, and what to do with the trust assets when your pet dies.
A pet trust is a written legal agreement, created in a will or trust, which can be crafted to provide for care of pets. You and your attorney will detail when and under what circumstances (e.g. death or incapacity) the trust will take effect. When you create a trust, you as the grantor have the authority to specify exactly how you want assets in the trust to be used, on behalf of yourself and the trust’s beneficiaries. A pet trust operates on a similar principle. You establish the trust and name a trustee. The trustee holds cash or other assets for the benefit of your pets. Funds held in the trust are used to pay for the pet’s expenses. That includes: veterinary care, grooming, feeding and boarding costs. A pet trust can provide your pets with a smooth transition and afford you the confidence that your pets will be cared for as you want.
Pet trusts can be used to care for any designated pets or domestic animals. This can include dogs, cats, horses, rabbits, exotic birds, etc. Establishing a plan for your pet’s long term health and maintainance is important for owners who want to ensure that their faithful companions will receive proper care throughout their life.
New York state has enacted a statute which allows pet owners to create a trust fund for their pets and to have a trustee (which may be more than one person) to manage those funds. This New York statute provides that a trust for the care of a designated domestic or pet animal is valid. It indicates such trust shall terminate when the living animal beneficiary or beneficiaries of such trust are no longer alive. Upon termination, the trustee shall transfer the unexpended trust property as directed in the trust instrument or, if there are no such directions in the trust instrument, the property shall pass to the estate of the grantor. A court may reduce the amount of the property transferred if it determines that amount substantially exceeds the amount required for the intended use. If no trustee is designated or no designated trustee is willing or able to serve, a court shall appoint a trustee and may make such other orders and determinations as are advisable to carry out the intent of the transferor and the purpose of this section.
Until relatively recently, most states didn’t allow trusts for animals. Traditionally, upon a person’s death or incapacity, an individual had limited and mostly ineffective methods to ensure their pet was cared for. Now, every state and the District of Columbia have laws governing the creation and use of pet trusts. In New York, Estates, Powers and Trust Law Section 7-8.1 authorizes their creation. The trust can be (i) a testamentary trust created under a will that takes effect upon the death of the pet owner, or (ii) an inter vivos trust created and effective while the pet owner is alive.
What is a Pet Trust?
A pet trust is a legally sanctioned arrangement providing for the care and maintenance of one or more companion animals in the event of a grantor’s disability or death. The “grantor” (also called a settlor in some states) is the person who creates the trust, which may take effect during a person’s lifetime or at death. Typically, a trustee will hold property (cash, for example) “in trust” for the benefit of the grantor’s pets. Payments to a designated caregiver(s) will be made on a regular basis. The trust, depending upon the state in which it is established, will continue for the life of the pet or 21 years, whichever occurs first. Some states, including New York, allow a pet trust to continue for the life of the pet without regard to a maximum duration. This is particularly advantageous for animals that have longer life expectancies, such as horses and parrots. However, you can’t create a pet trust to continue indefinitely—for example, for offspring of your current pet or others that the caretaker might acquire.
Why a Pet Trust?
Because trusts are legally enforceable arrangements, pet owners can be assured that their directions regarding their companion animal(s) will be implemented. A trust can be very specific. For example, if your cat only likes a particular brand of food or your dog enjoys daily romps in the park, this can be specified. If you want your pet to visit the veterinarian four times a year, this can also be included. Since pet owners know the particular habits of their companion animals better than anyone else, they can best describe the kind of care their pets should have and list the person(s) who would provide that care.
Issues to Consider
• A pet trust allows you to legally choose a caretaker for your pet. Who would you like to act as caregiver, and as successor caregivers (select at least two) if the first is unable or unwilling to perform? Decide if your pets should be kept together or distributed to different people or organizations. Choosing a caretaker is always the most important decision you have to make. This is the person who will have legal custody of your pet and will responsible for day-to-day care. When choosing a caretaker, you should think about the person’s living situation, allergies, affinity for a particular kind of animal, etc. Don’t assume the person you want to name—even if it’s your spouse or best friend—is willing to take on this responsibility. The terms of the trust should be discussed in advance with the potential caretaker to ensure that the animal will be cared for appropriately. A caretaker should understand in advance that he or she will become the animal’s owner and, as such, will have all the rights and responsibilities of ownership.
• The trustee (usually, although not necessarily, a different person) is responsible for enforcing the terms of the trust and using the funds to pay for the care of the pet(s). This is the person who makes sure the trust money is being spent appropriately on the animal, and not for any other reason. The trustee cannot personally benefit from the principal or the income of the trust. (However, the trustee is entitled to a commission set by New York State law).
Payments to a designated caregiver will be made on a regular basis or as directed. It may not be wise to give your pet’s guardian all the money at once. If the guardian has a change in life situation, your pet may face an uncertain future. You also appoint a trustee and successor trustee, to ensure that the caregiver is doing his or her job. Generally, a trustee can be any adult, or an organization or institution. Check with your state’s laws to determine specific requirements. Before you select your trustee, make sure to review the requirements of the job and that they understand the responsibilities. It is a good idea to select an alternate trustee, even if your first trustee is an organization.
• Decide whether the caregiver and trustee should be paid for their services and, if so, what amount that should be.
• Adequately identify your pets to prevent fraud, such as through physical discriptions, photos, licenses, microchips, DNA samples, or alternatively, by describing your pet as a “class”—for example, as “the pet(s) owned by Mary at the time of her disability/death.” A excellent way to do this is to have your pet microchipped (if you haven’t done so already) and record the chip number in the pet trust document. Write something like Ms. Jane Smith’s Animals" not “Lucy, Money, Molly...” in the documents since animals change (death, adding pets, etc.) so the document lives.
• Your trust can also give specific directions about the daily care, medical attention, diet needs, and even burial/cremation of your pet. The pet trust’s instructions to your pet’s caretaker can be as simple or as detailed as you choose. You may want to incorporate such details as the brand of food your pet prefers, the name of their veterinarian and descriptions of favorite toys. Describe in detail your pet’s standard of living and the level of care you expect your pet’s new caregiver to provide. Include information about your pet’s frequency of vet and grooming visits, sleeping arrangements, and exercise. You may have established regular routines with your pets, such as taking them for walks in a particular place, that you’d like the caregiver to continue to observe. Provisions can even require the caretaker to bring the pet for visits with an incapacitated owner. A client with multiple pets may want to specify that they continue to live together. Finally, determine what would trigger the pet being removed from the caregiver and transferred to the alternate caregiver.
• Require regular inspections of your pet(s) by the trustee to ensure the caregiver is doing his or her job.
• Determine the amount of funds needed to adequately cover the expenses for your pet’s care (generally, this amount cannot exceed what may reasonably be required given your pet’s standard of living). You need to consider your finances, your pet, any existing health issues and the amount of care that will likely be involved for the pet’s anticipated lifespan. When deciding how much money to fund the pet trust with, you should consider: veterinary expenses, grooming expenses, transportation costs, and housing.
• In addition to the cost of care for your pet(s), you’ll need to cover the cost of administering the trust. Determine the amount of funds needed to adequately cover the expenses of administering it. Do the best you can to estimate how much the trustee will need to take care of your pet. The appropriate amount varies widely depending on the type of animal, its age and condition. Some issues that arise with these trusts include whether the amount of funds in the trust is “reasonable” according to court standards. The amount of property that can be placed in a pet trust is limited by this standard, as it cannot substantially exceed the amount required for the maintenance of the pet. Generally, up to $20,000 is allowable, but pets with more expensive care may be allowed higher amounts. Be aware that if you set aside an amount that’s unreasonably high, family members could challenge it in court, and a judge will likely reduce it. Leaving too much for the pet, “hoping” the remainder goes to animal charities, is also to be avoided. The executors can petition the NY Surrogate's Court for permission to reduce the amount passing to the pet trust. It’s uncommon for a trust to be challenged in court. But, relatives who are angry at being disinherited sometimes do challenge the terms of a pet trust, especially if the amount left for the pets seems much more than will be neeed for the animals’ care.
• If you leave more money than was necessary, where do you want the rest to go? Designate a remainder beneficiary when you create the pet trust in the event the funds are not exhausted after your pet dies. The beneficiary can be a person or an organization. You could have the money divided among the beneficiaries to your will or donate it to charity. Any property still remaining in the trust when it terminates will generally pass according to the terms of the trust. Thus, the creator of the trust has the ability to dictate where the trust property will go after it is no longer needed to care for the pet.
• Decide how often the caregiver should report on your pet’s status to the trustee.
• Specify end of life care treatment for pets, and any burial or cremation arrangements that you’d prefer. Consider when to terminate your pet’s medical care when faced with a terminal illness. The decision to terminate can be a joint decision shared by the vet, the trustee and the caregiver.
Pet Trusts Can Be Inter Vivos or Testamentary
A pet trust can be an “inter vivos” trust, created during the life of the pet owner. Or it can be a “testamentary” trust under a will, effective after death.
An inter vivos trust has the advantage of being immediately available for the care of an animal if the pet owner becomes incapacitated. The inter vivos trust has the disadvantages of being more expensive to create, and in some cases, of not being adequately funded (or not funded at all) at the time of death of the pet owner. If the pet owner choses an inter vivos trust, it is wise to have back-up funding of the pet trust in the will, to avoid the risk of having an unfunded, and thus useless, trust at the time of death.
A testamentary pet trust is funded under a will. The disadvantage of a testamentary trust is that it will not be in effect during periods of disability, so pet owners should have their attorney execute a power of attorney appointing an agent to manage the owner’s financial matters, (including a specific provision authorizing the payment of the costs of care of the owner’s animals) to be used if the pet owner becomes incapacitated. The attorney should also plan for the care of the pet during the period from death to the admission of the will to probate as no action can be taken by the executor to execute its provisions until the will has been admitted to probate and the executor has received the authority to proceed. Depending on the jurisdiction, the time between death and the authority to act can vary between several weeks and several months.
What about Last Wills?
It’s a common misbelief that providing for pets in a will is enough to guarantee their continued care. Remember, wills are for distributing property. Once that task is done, there’s no ongoing supervision. So if you make provisions for a beloved dog in your will, the person receiving your companion is under no legal obligation to keep or care for your dog. But with a pet trust, the trustee has a legal duty to carry out your instructions. Also, a will is not in effect until after the pet owner has died. Thus, if the owner is incapacitated, the pet is unprotected--and hungry.
Finally, even though it may seem simple to include a bequest for your pet within your will, it is not the best approach, because your will must go through probate before it takes effect. This can be time consuming, and your pet will need immediate attention. During probate, your pet’s care, or even ownership, can be in jeopardy.
Factors to Consider
• A properly formed pet trust, unlike a will, can better withstand legal challenges from family members who are unhappy with your decisions.
• A pet trust is effective immediately upon your death. A will can take weeks or even months to execute.
• A pet trust can apply if you become incapacitated. The caregiver you named could immediately take custody and control of your pets if necessary. The provisions in a will, by contrast, don’t have any legal effect until your death. For example, if you are moved to a long-term care facility, you and your pet can move together. • The court retains the authority to implement the intent of the trust creator and the purpose of the pet trust. For example, the court has the power to compel the trustee to use the trust property only to care for the pet.
The Solution: Pet Trusts
A pet trust is a legally enforceable mechanism for providing for the care and maintenance of pets. In essence, pet trusts stipulate that, in the event of a grantor’s disability or death, a trustee will hold property (for example, cash) “in trust” for the benefit of the grantor’s pets. The “grantor” is the person who creates the trust, which may take affect during a person’s lifetime or at death. A pet trust can be created as part of your will or as a separate living trust. In a will or trust, you can name someone to be the caretaker for your pets and leave funds, in the care of a trustee, to provide for your pets. A pet trust can do what a simple testamentary bequest cannot: it can ensure that your pets receive care in accordance with your instructions, which you outline for your pet’s caretaker in a legally enforceable document.