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Trusts To Care For Pets After-Death Catching On By James L. Dam
Estate planning attorneys are increasingly drafting trusts to provide care for a client's pets after the client dies.
Thirteen states now have laws - all enacted in the last 10 years - allowing trusts to have animals as beneficiaries and providing that the trusts can be enforced by someone acting on the animal's behalf.
In other states, attorneys are drafting trusts that are indirectly for a pet, by naming a caretaker of the pet as the beneficiary and providing that the caretaker can receive distributions from the trust only if the pet is properly cared for.
The use of both types of "pet trusts" is catching on, as clients are increasingly concerned about the fate of their pets after their death, according to lawyers.
Boston attorney Melissa Langa said that when she raises the issue of pet care in estate planning with other attorneys, "they tend to laugh about it."
However, she has been asking most of her clients about this for the past two years, and "nine times out of 10 they want to do something about it," she said.
Pet trusts can be useful for clients who wouldn't feel comfortable just leaving their pet and some money outright to a relative or friend.
For some of these clients, the problem is that they have a pet that is difficult to care for, such as a horse. For others, it's just that they don't have many relatives or friends.
Bette Heller of Englewood, Colo., told Lawyers Weekly USA that "a lot of people don't have someone they can count on, or they have someone, but they don't want to leave the person with all the money the pet could potentially need, because the person isn't a relative."
Peggy Hoyt, an estate planner in Oviedo, Fla., and the author of a book on the subject, agreed.
"The most common situation is where clients don't have any children and their pets really are their children," she said.
When a pet trust is used, the amount of money put into it is typically about $25,000 per animal, according to lawyers.
More might be put in for a horse, less for an older dog or cat.
Houston attorney Albert Vacek said he recently had a client provide that a trust for her cat would be funded with 5 percent of her estate, which is currently worth about $500,000.
Some trusts are also funded with property to be used by the pet and caretaker, such as a house, ranch or truck.
In states without a pet-trust statute, creating a trust with an animal as a beneficiary is risky.
When these trusts have been challenged by heirs, some courts have held them to be invalid for lack of a beneficiary.
Courts have also invalidated them for violating the "rule against perpetuities," because their duration is not based on a human life and, with a long-lived pet, could be more than 21 years.
Even where courts have not invalidated the trusts, they have generally held them to be unenforceable - meaning that it's entirely up to the trustee whether the trust will be implemented.
In 1993, however, the Uniform Probate Code was amended to solve these problems. Section 2-907 provides that a trust for the care of a "domesticated or pet animal" is valid, and that the trust can continue until the animal's death.
The trust can be enforced "by an individual designated for that purpose in the trust instrument or, if none, by an individual appointed by a court upon application to it by an individual."
A court can reduce the amount of property in the trust if it finds it to be excessive.
The pet-trust laws enacted in 13 states all have provisions similar to this, with some variations.
In New York and New Jersey, for instance, these trusts cannot last more than 21 years. Colorado, on the other hand, allows a trust to continue until the death of a pet's offspring "in gestation" at the time of the owner's death.
Under all the statutes, the trust is essentially treated like a trust for a minor child, and the individual appointed to enforce it is treated like a guardian, said Heller.
Clients only need to name the animals or a class of animals - such as "all dogs and cats I own at the time of my death" - and provide the funds.
However, they generally would want to go ahead and also name a trustee, an enforcer, a caretaker, and alternates for each of these, as well as a remainder beneficiary.
Clients may also want to provide some guidelines about the care to be given, including how much money should be spent annually or monthly, how expenses will be paid, and whether the caretaker will be paid a fee.
Details about the care to be given might be provided in a separate document and incorporated in the trust by reference, said Heller.
Hoyt said the client might also provide that certain major decisions, such as euthanizing the animal, must be made by a panel of people, including a veterinarian.
In states without a pet trust statute, clients might consider invoking the law of a state that does, said Jensen.
However, for that to work, the trustee or the assets would have to be located in the other state, and it may not be worth the trouble, he said.
An alternative is to name a caretaker as the beneficiary and condition payments to the caretaker on the proper care of the pet.
Gerry Beyer, a law professor at St. Mary's University, said that this type of trust may be a little more complicated to draft but generally works just as well as a statutory pet trust.
The trust can be enforced by the caretaker, who can demand that the trustee pay for the pet's care.
It can also be enforced by the trustee, who can withhold payments, or replace the caretaker, if care is not properly given.
It can also be enforced by alternate caretakers, who can demand that, if proper care isn't being given, they be allowed to replace the current caretaker, and by remainder beneficiaries, who can demand that the terms of the trust be complied with or else the trust's assets be turned over to them.
The trust can last for the lifetime of the caretaker plus 21 years, but can also provide that it will terminate on the death of the pet, assuming that occurs sooner.
A drawback of trusts for caretakers, however, is that if none of the caretakers named in the trust is willing and able to take care of the pet, the trust may have to be terminated early.
Because of that risk, said Beyer, the trust should provide that if the trust terminates before the pet dies, the trustee will just try to find a good home for the pet and leave the pet and some money outright to a new owner.
There may also be a risk that a court would invalidate or refuse to enforce the trust on the basis that the beneficiary is really the pet, not the caretaker.
Alan Jensen, an estate-planning attorney in Portland, Ore., said he believes this is a significant risk.
"A court may very well look through the arrangement and say it's an honorary trust for the pet," he said.
However, Beyer disgreed.
He said the trust is safe from attack "because it really is just a conditional gift for a human."
Keith Branyon, an attorney in Fort Worth, Texas, agreed with Beyer, noting that the arrangement is analogous to leaving a farm to several children and providing that the child who takes care of it be paid a certain amount of money per month.
As with a statutory pet trust, clients can be as detailed as they want about the care that will be provided, how decisions will be made, how expenses will be paid and how the caretaker will be compensated.
Langa said that one approach is to provide that the trustee will pay certain expenses such as medical expenses, but that otherwise the money in the trust will just be paid to the caretaker in annual installments, upon verification that the pet is being properly cared for.
You might also have the installments spread over just three years, and provide for transfer of the ownership of the pet to the caretaker after the third year, she said.
That way, you keep the costs of the trust down by not forcing it to last a long time. The idea is that if the caretaker takes good care of the pet for three years, chances are the person will continue doing so in the future, Langa said.
Another option is to not use a pet trust, but just make a gift of the pet and some money to somebody on the condition that they take good care of the pet.
The problem, however, is that the condition would be difficult to enforce.
"Nobody could stop the person from taking the money and leaving the dog on the highway," said Branyon.
Beyer noted that someone named as an alternate recipient of the gift could try to enforce the condition, but "that would be very hard from a practical standpoint, especially if the money has already been spent."
A conditional gift of the pet and some money may be a good option, however, if the recipient is a reputable institution that provides lifelong pet care.
For instance, in exchange for a donation, such care will be provided by Texas A&M University's College of Veterinary Medicine, through its "companion animal life-care center" (www.cvm.tamu.edu/petcare).
A problem, however, is that for good-quality care, institutions typically charge so much that it would be cheaper to use a trust, said Beyer.
For instance, to enter into an arrangement with Texas A&M to care for a dog or cat, you must agree to leave the university a minimum bequest of $50,000 to $100,000, depending on your age.
For a horse, the minimum would be $100,000 to $210,000.
An example of a less expensive option is the Bide-A-Wee Golden Years Retirement Home in Westhampton, N.Y., which charges $10,000 for a dog or cat, but only accepts animals that are at least 8 years old (www.bideawee.org/retirement.asp).
Even cheaper programs can be found - often affiliated with a local Humane Society, Animal League or other organization that cares for homeless animals - but may not offer, or guarantee, the type of care a client wants.
Clients may also want to provide for the care of their pets in the event they become disabled by including a provision for this in a durable power of attorney.
The provision would allow the attorney-in-fact to use the client's funds to care for the pet, or to find a suitable new home for it.
It might also provide that the attorney-in-fact can do everything that a trustee could do under the terms of the pet trust if the client died, said Heller.
An extensive article on this subject by Professor Gerry Beyer, along with sample trust provisions and a list of other sources of information, can be found at: www.professorbeyer.com/Articles/Animals.htm.
Peggy Hoyt's book on pet trusts, "All My Children Wear Fur Coats," can be ordered at: www.legacyforyourpet.com.
Another book, "When Your Pet Outlives You," by David Congalton & Charlotte Alexander, can be ordered at: www.dogwise.com.
Questions or comments can be directed to the writer at: jdam@together.net
Thirteen states have laws allowing trusts to name pets as beneficiaries and providing for enforcement by someone acting on the pet's behalf:
Alaska: Sect. 13.12.907.
Arizona: Sect. 14-2907.
Colorado: Sect. 15-11-901.
Florida: Sect. 737.116 (effective Jan. 1, 2003).
Iowa: Sect. 633.2105.
Michigan: 700.2722.
Montana: 72-2-1017.
New Mexico: Sect. 45-2-907.
New Jersey: 3B:11-38.
New York: Sect. 7-6.1.
North Carolina: Sect. 36A-147.
Oregon: Sect. 128.308.
Utah: Sect. 75-2-1001.
In addition, three states have laws that recognize trusts for pets as valid but do not provide for their enforcement if the trustee decides not to implement them:
California: Probate Code Sect. 15212.
Missouri: 456.055.
Tennessee: Sect. 35-50-118.
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July 22, 2002
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