Remember Your Pets in Your Estate Plan by Sarah Gaymon, CPA
Posted on September 27, 2022
by
Sarah Gaymon
In 2007, multi-millionaire hotelier Leona Helmsley made headlines when she passed away leaving $12 million to her dog Trouble. Today, it is commonplace for pet owners to specify in their wills how they wish their furry friends to be cared for financially and physically long after they are gone. In fact, all U.S. states and the District of Columbia currently recognize individuals’ rights to set up legally enforceable trust funds to ensure their pets receive immediate care not just upon the owners’ deaths, but also in the event they become ill or disabled.
Although it is simple to establish a pet trust, it is important to work with trusted advisors to ensure the trust you create complies with applicable state laws and addresses all the potential “what if” scenarios that can leave your pet abandoned and without the daily care he or she deserves.
The first step required to establish a trust is to identify who will take physical custody of your pet. If you do not have any family members or friends willing to take on this responsibility, you may consider placing your pet in a private animal sanctuary or perpetual care organization dedicated to finding forever homes for four-legged companions.
Next, consider who is best suited to manage the trust assets and ensure that funds are distributed in the manner you wish for your pet’s continuous care. This may be a friend or family member who is unable to take physical custody of your pet. Alternatively, you may name as trustee one of your professional advisors or a professional trust company experienced in these matters.
When drafting the trust documents, ensure you provide the designated caregiver and trustee with as much detail about your pets as possible to prevent any potential fraud. This can be done by attaching to the finalized trust agreement photos of your pets, their microchip numbers or even samples of their DNA. You can also refer to your pets in a class by including specific language such as “any pet(s) owned by you at the time of your death” to help with later identification of your pets.
Pet trusts also enable you to make your wishes for the care of your pets as specific as desired. For example, the terms of the trust may include what foods should be purchased to feed the pets, what toys to buy them and how they should be groomed. You may also include in your trust documents a stipulation requiring the regular inspection of your pet(s) by the trustee to ensure that they are being cared for as you intended and that no fraud is taking place. To ensure your directions are followed, you may assign your named trustee the responsibility to follow up with caregivers on how they use trust funds. This, along with the trustee’s responsibilities to administer the trust, will require you to set aside a separate amount of funds to pay the trustee for his or her services.
Financially, you, as the grantor of the trust, should consider how much money will be required to maintain and care for your pets over their lifetimes, including costs for veterinary care, medications, shelter, boarding, transportation and nourishment. Special care should be taken to avoid overfunding a trust, since doing so may open it to the possibility of a legal battle. This was the case with Leona Helmsley’s dog, whose inheritance was eventually reduced to $2 million when a judge decided the initial $12 million was excessive for the pet’s care.
You may also choose to provide instructions for the disposition of your pets after they pass away. Do you want your pets buried under the tree in your backyard, or do you want them to be cremated and their ashes sprinkled in the flowers they always dug up? Some find that providing these instructions in their trusts provides them with the comfort that their pets will also be taken care of when they eventually pass.
Finally, it is important for pet owners to consider how they want the funds remaining in a trust distributed after their pets pass away. You may elect to distribute any remaining funds to family members or other named beneficiaries, or you may choose to donate the remaining assets to a charity, including those that help animals and support animals’ rights.
About the Author: Sarah Gaymon, CPA, is an associate director of Tax Services with Berkowitz Pollack Brant Advisors + CPAs, where she works with entrepreneurs and high-net-worth families to plan for tax-efficient wealth preservation and multi-generational wealth transfers. She can be reached at the CPA firm’s West Palm Beach, Fla., office at (561) 361-2050 or info@bpbcpa.com.
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