Transcript Planning For Your Pets

How to Include Pets
in an Estate Plan
Visiting Professor Gerry W. Beyer
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 71.1 Million households own at least one
pet (63% of all households)
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Dogs = 43.2 million households
Cats = 37.7 million households
Fish = 14.7 million households
Birds = 6.4 million households
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 Unconditional love
 Companionship
 Lowered blood pressure
 Lessened risk of heart disease
 Improved concentration and mental attitude
 Shortened recovery time after
hospitalization
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Surveys reveal:
 79% sleep with pets
 70% would rather be stranded on desert
island with pet than spouse
 31% take off work to be with a sick pet
 68% dress up pets for the holidays
 Huge rewards for return of lost pets or
locating person who kills pet
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Leona Helmsley – Trouble (dog)
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Dusty Springfield – cat
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Doris Duke – dog
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Vast majority of people do not have wills.
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Of those with wills, only a small percentage
plan for their pets.
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What planning is done, is often inadequate.
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 In England, the common law courts
favored gifts to support animals.
 United States courts originally
unsupportive of provisions to benefit
pets.
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Traditional Problems in United States
 Rule Against Perpetuities
▪ Trusts can’t have unlimited life
▪ Measuring life must be human, not animal
▪ If non-human, rule is violated and gift fails
 Honorary Trust
▪ No human beneficiary capable of enforcing trust
▪ Purpose not considered charitable as not for public
benefit
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Modern United States Developments:
 Some judicial opinions approved gifts to
benefit pets.
 Uniform Probate Code (1990) -- § 2-907
 Uniform Trust Code (2000) -- § 408
[Ohio § 5804.08]
 Other state legislation
 As of April 2012, 46 states and D.C. have
enabling legislation.
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1. Animal Card
 Carry in wallet to alert emergency personnel
Front
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1. Animal Card
 Carry in wallet to alert emergency personnel
Back
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2. Animal Document or Notebook
 Detailed information
 Easy for caregiver to find
 Consider keeping near food
 Include all important information and
documents
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3. Door Sign
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4. Durable Power of Attorney
 Authorize agent to spend pet owner’s money
for pet care.
 Authorize agent to place pet with caregiver and
to pay caregiver’s expenses and/or a fee.
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1. Traditional Pet Trust
▪ Effective in all states.
▪ Caregiver/Beneficiary receives funds for pet care in
accordance with pet owner’s (settlor’s) directions.
▪ Comprehensive plan
▪ Analog to gift in trust for children
▪ The “gold standard” of pet planning
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2. Statutory Pet Trust
▪ Authorized in 46 states and D.C.
▪ Simple plan
▪ Statute provides operation and enforcement
provisions
▪ Analog to Uniform Transfers to Minors Act gift for
children.
▪ The “better than nothing” pet plan.
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1. Inter Vivos or Testamentary
 Inter Vivos
▪ Avoids delay and gap in pet’s care.
▪ Increased lifetime costs and hassles.
 Testamentary
▪ Probate of will required.
▪ De minimus lifetime expense.
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2. Designate Caregiver/Beneficiary
 Interview carefully.
 “Test” animal in person’s household.
 Name alternates.
 Never name trustee as destroys
checks/balances.
 Consider animal care panel to select alternate
caregivers.
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3. Nominate Trustee
 Individual or corporate?
 Compensation?
 Name alternates
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4. Transfer animal to trust – “animal funding”
 Inter vivos = deliver animal to trustee along with
appropriate ownership documents.
 Testamentary = specific bequest of animal in pet
owner’s will to the trustee, in trust.
 Trust then provides for trustee to deliver custody
(not ownership) of animal to the
caregiver/beneficiary.
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5. Transfer other property to trust
 Factors:
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Type of animal
Life expectancy
Potential of expensive medical costs
Fee for trustee and/or caregiver
Liability insurance injuries pet causes
Health insurance for pet
Size of pet owner’s estate
 Warning
▪ Do not transfer unreasonably large amount of property as it
triggers contests by heirs and beneficiaries.
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6. Describe pet’s standard of living
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Daily care
Routine medical care
Emergency care
End of life plans
Should be specific, detailed as to each pet
Can be documented during lifetime to support longterm care monetary calculations
Should provide for accountability
Should consider changing circumstances
Should not be so rigid as to be inflexible
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7. Specify distribution method for pet’s
care
 Fixed sum
▪ Simple
▪ Not account for change in circumstances
 Fix sum with trustee discretion to pay
additional expenses.
 Expense reimbursement only
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8. Consider additional distributions for
caregiver/beneficiary
 Distributions may increase quality of care.
 Distributions decrease amount available for
pet care.
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9. Limit duration of trust
 Comply with your state’s version of the Rule
Against Perpetuities.
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10. Designate remainder beneficiary
 Consider charity which benefits same type of
animal.
 Do not name caregiver as then caregiver
lacks incentive to keep animal alive.
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11. Identify animal to prevent fraud
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Special Identifying marks
Tattoo
Microchip
DNA
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12. Require trustee to inspect animal
 Random unannounced at-home visits.
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13. Provide instructions for final
disposition of pet
 Pet cemetery
 Cremation
 Memorial site on Internet
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“I leave $10,000 in trust to care for
Rover.”
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Statute “fills in the blanks”
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Person to enforce
Use of money
When trust ends
Distribution of remaining property
Exact method depends on state statute
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1. Outright gift of animal and money
 Risky and uncertain, but cheap and easy.
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2. Transfer to life care center
 Good for hard-to-place animals (exotics,
farm animals, etc.).
 May require significant “endowment.”
 Quality varies tremendously so due diligence
is essential.
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http://www.professorbeyer.
com/Articles/Animals.html
Gerry W. Beyer
Barry Seltzer
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1. Income Tax
 Settlor/Pet Owner – If revocable, settlor
responsible for income earned by trust
property.
 Beneficiary/Caregiver – If irrevocable,
beneficiary responsible for income tax up to
amount of trust’s distributable net income.
 Trust – If irrevocable, trust responsible for
income tax on trust income retained in trust.
 Planning Technique – Provide for trustee to
invest only in tax-exempt municipal bonds.
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2. Gift Tax
 Revocable trust – no gift tax consequences.
 Irrevocable trust – no gift tax if covered by
lifetime gift tax exemption (unlikely to
qualify for annual exclusion).
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3. Estate Tax
 Revocable trust or testamentary trust –
Property included in settlor’s gross estate.
 Irrevocable trust – Can be structured so none
of the property included in settlor’s gross
estate.
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