Washington Estate Planning

The Power of Pet Trusts

If you love your pet like a family member,
the American Society for the Prevention of Cruelty to Animals has some advice:
Consider planning for your pet's future care as though the animal were a real
dependent.

In a very real sense, the truest
“dependant” a person can have is their own pet. A pet is neither quite a person, so the law goes, nor is a pet
quite a thing. Consequently, planning
for your pet's future, if you are not in it, is an essential responsibility.

Trusts are fairly powerful legal
devices, amendable to many situations, and when they primarily benefit a friend
with feathers, fins or fur, then they are appropriately termed “pet-trusts.”
This special form of trust was the recent topic of an article in The Wall Street Journal titled “Pondering a Trust for Your Pet.”

The American Society for the
Prevention of Cruelty to Animals (ASPCA) is taking unprecedented steps to
address the practical and legal considerations of ownerless but bequeathed
pets. If you are an animal-lover planning your estate, then this ought to be an
interesting development.

Whether a “pet trust” is the
right step for you and your animal companion may vary on your pet’s needs and
your family’s commitment to the animal. Regardless, do not simply assume that
your pet will have a home without you and will be cared for accordingly. A pet
trust will provide you with peace of mind backed by fiduciary certitude that
all will be well for your special friend.

Reference: The Wall Street
Journal (September 7, 2012) “Pondering a Trust for Your Pet”

Large Animal – Large “Pet Trust”

A pet trust, which ensures care for the horse if the owner gets sick or dies, is
often the best way to ensure the horse’s care.

Trusts can be remarkably powerful
tools to provide for all members of the family, especially the ones most in need
of care. This includes four-legged family members that stand “16 hands tall”
and are adept at dressage. Yes,
trusts can be an essential part of your “horse care” plan, as recently
highlighted in The Wall Street Journal article, Stable
Value: Putting Your Horse In A Trust.

Horses are not “pets” in the
classical sense, as their needs are far greater than those of the family dog or
cat. Not only does a horse enjoy a longer life-span, but horses require more wide
open spaces, exercise, care, grooming and food. The upkeep on a horse can be
rather expensive.

Through a pet trust you can set aside sufficient funds to provide for your
horse’s unique needs and ensure his care and safety should you predecease him. Even
more significant, you can establish important safeguards to ensure proper
deployment of those funds.

Of course, one of the biggest
challenges is selecting the proper caretaker of your horse. Would a trusted
loved one be willing to serve? Do not assume that charities, shelters or
“rescues” would step in to care for your horse. Recent financial difficulties
affecting the broader economy have likewise strained the ability for charities
and horse shelters to care for horses currently under their care.

Unfortunately, pet trusts are
not recognized in every state, but the problem still remains. If you are a
horse owner, then your horse is an important member of your family and you must
plan accordingly.

To learn more about your state
laws and the alternatives open to you (and your horse), be sure to seek competent
counsel.

For more information and ideas I
recommend reading the original Wall
Street Journal article. Be sure to share it with your equestrian friends,
too

.Reference: The Wall Street
Journal (March 7, 2012) “Stable
Value: Putting Your Horse in a Trust”

Pet Trusts Provide Peace of Mind

The pet trust is a little-known legal option for the elderly and caregivers worried about what will happen to beloved animals following the deaths of their owners.

The four-legged members of a household (or two-legged, or conceivable even eight, as the case may be) are undoubtedly special members in any home. Accordingly, proper planning ought to address them as well.

Whatever the size of your pet and whatever the size of your family, it’s simply not always enough to leave these matters for your heirs to figure out. After all, the well-being of your animal (i.e., your friend and companion) is at stake and so it’s worth considering legal devices to provide for them, such as a pet trust.

 In a way, the idea of a “pet trust” is a natural one and yet it’s also not always common. Deborah Jacobs recently tackled the subject over at Forbes and her article certainly is worth a look. In its basic formula, a pet trust is like any other trust in its formation, however, it is designed to take care of the member of the family that can’t take care of itself (nor speak to which home it will move to upon its owner’s passing).

While that can be meaningful for many pet-owners, there also is reason for the elderly to pay special attention to the prospect, as another article over at the New Old Age Blog points out, here.  For the elderly, especially, a pet can be an incredibly important family member and one for whom planning can be all the more important. Why? The pet may outlive its owner. In the end, a pet trust may afford important protection and care for the pet, as well as peace of mind to the owner.

Reference: Forbes (February 14, 2012) “If You Love Your Dog (Or Cat Or Gerbil), Read This” and The New York Times – The New Old Age Blog (February 3,2012) “The Pet Problem”

ESTATE PLANNING / PET TRUSTS

In the rush to button down an estate plan, people often spend most of their time focusing on the big questions and overlook small—but increasingly crucial—details.

According to a recent article in the Wall Street Journal, there are approximately 400,000 pets each year looking for new homes because their owners die. Pets are part of the family so it only makes sense to provide for them when planning your estate. That may mean simply entrusting their care to another family member or establishing a formal Pet Trust, authorized in 46 states and the District of Columbia.

A Pet Trust may be created under a Last Will and Testament or a Revocable Living Trust. Either way, there generally are four parties to any Pet Trust: the trustee, the caretaker, the pet (one or more) and the remainder beneficiary. In addition, a Pet Trust should have property contributed to it to adequately fund the lifelong care of your pet.

The trustee may be an individual, a corporate fiduciary, or both. As with most choices, there are advantages to each approach. The same is true with the caretaker. However, it may be prudent to ensure that the trustee and the caretaker are not one in the same.

While a trusted friend or family member likely knows your pet better than any outsider, whenever money is involved… there also lurks the temptation for mischief. For example, there have been reported instances where pets have died, only to be replaced by look-alikes so the trustees/caretakers continued to receive compensation for their services.   Also, remember to appoint successors in case a primary trustee or caretaker is unwilling or unable to serve.

The remainder beneficiary is the party designated to inherit any remaining trust property upon the death of the last surviving pet beneficiary. Typically, the remainder beneficiary is a family member, friend or charity.

So, just how much of a nest egg do you need to set aside to fund the future care of your pet? The amount depends on two variables – the life expectancy of your pet and the projected cost of care. Your veterinarian is an excellent resource when estimating the life expectancy of your pet, just as your check register is an excellent resource to calculate the actual cost of annual care. Once you know the likely remaining life expectancy of your pet and the historical cost of care, simple multiplication is all that is needed to determine the amount of trust property required to provide the appropriate nest egg. You may want to err on the conservative side, too, since inflation will affect the future cost of care for your pet.

Reference: The Wall Street Journal (July 23, 2011) “When Estate Plans Fail”

Two Types of Pet Trust: Which Do You Need?

There are two ways to establish a pet trust. You can establish a living trust for your pets (in legal terminology this is called an inter vivos trust), or you can use your will to establish a testamentary trust, which will only take effect when you pass away. Living Pet Trust When you establish a living trust on behalf of your pet, the trust becomes effective immediately. Once the trust is established, you’ll transfer assets into it and serve as the initial trustee. You’ll also name a successor trustee to take over for you in case of your incapacity or death. You retain control of the trust while you’re alive and mentally competent, so you can change the terms of the trust and even terminate it at any time.  As a practical matter, a living pet trust might not do much of anything as long as you’re in good health. In the event of your incapacity, though, your successor trustee will be empowered to quickly take control of the trust and manage it on behalf of your pet. And, of course, when you pass away, your successor trustee will be in charge of the trust, allowing your pet’s needs to be met without interruption. Testamentary Pet Trust A testamentary pet trust, on the other hand, is established using your will. This means that it only becomes effective after you pass away, so it can’t be used to provide for the care of your pet in the event of your disability. On the other hand, a testamentary trust can be less expensive to establish and there’s no need to transfer money into it while you’re alive. Instead, you can direct that a portion of the assets of your estate or your life insurance proceeds be transferred into the trust. Your estate planning attorney can help you determine which type of trust is appropriate for you and your pet.