Recently, an email arrived from a couple that had adopted one of our rescued Border Collies. In the email, the wife said they had decided to rewrite their wills to provide for the possibility of their pets out living them. She wanted to know if she could will her Border Collies to me. I was impressed - and then I thought about my own dogs. After doing some digging on the subject, I discovered that this is not as easy as it sounds. Here are some examples of what can go wrong:
* A millionaire left a pet trust for his dogs, stating that the remaining principle would go to the relatives when the last dog had died. Shortly after that, the relatives had the dogs euthanized.
* A pet trust was established for the life of the pets, with the remaining principal to go to a charity organization when the last pet died. The trustee, unwilling to give up the periodic trust payments, kept the trust operating long after the original pets had died by substituting look-alike animals. The lesson to be learned from this story goes to enforcement and oversight of the trustee.
* A cat whose very existence was unknown to the deceased owner's family members, died as a result of dehydration and starvation after two weeks alone and uncared for in the deceased's house.
*Under her will, a substantial amount of an estate was left to a housekeeper, whom the a woman had known for only three months prior to her death. The case includes the issue of whether the language of the will created a trust, for the benefit of her cats, with the housekeeper as trustee. The court held that the particular wording of the will was not an imperative or command and therefore created no obligation to care for the cats.
Writing out your will to ensure the well being of your pets, should they outlive you, requires some careful thinking. One thing that needs to be realized is when the time comes to settle an estate, a pet is classified as untitled personal property. This is the same category as jewelry, household furnishings and clothing. Your pet is not considered as something that lives, breathes, thinks and feels the pain of having lost you.
The Humane Society has made the suggestion of creating a separate document for your pets and referring to them generically as "any and all animals I may own at the time of my death." This way, the document can be updated without a lawyer if one of your pets dies or you acquire another one. It is also a good idea to make sure you have a second caregiver willing to step in if circumstances change and your initial caregiver becomes unavailable when the time arises.
When the demands for pet trusts increased, the rules pertaining to them needed updating so as to make them applicable for pets. In the past, trusts meant for pets were invalid for two reasons. A human beneficiary had to be defined in certain terms to enforce the trust, and the rule against perpetuities, required a human who could take care of the trust for the duration of the trust.
In general, a pet trust is created for the continued care and maintenance of a pet after the owner has died. The trust must be funded with some amount of money or property, and a trustee must be designated to administer the trust. As demand for pet trusts increased, the law began to bend to accommodate them. The first solution was to create the pet trust as an "honorary trust." However, the law could not enforce this because it was within the sole discretion of the trustee to carry out the trust. If the trustee chooses not to enforce the trust, then the trust funds would be returned to the transferor's estate and distributed as part of the residue. Today many states have either changed the rules against perpetuities or they have made the pet trust an exception to it.
Under the laws of many states, a pet trust is now valid in its own right and is no longer considered an honorary trust. The trustee does not have option to enforce or not to enforce. The trustee must administer the trust and make distributions for the benefit of the pet, or the court will appoint a successor trustee.
When you draft the terms of your pet trust, it is important to realize what this could mean and how it could be misintrepreted or abused. For example, if, upon the pet's death, the remaining principal is to go to the trustee, then the trustee will have an interest in seeing that the pet lives a short life. If the trust is to go to a third-party, then the trustee has an interest in extending the trust as long as possible, perhaps by refusing to euthanize a pet living in pain, or by substituting a look-alike animal when the original pet dies. Because the pet cannot enforce the provisions of the trust, the law provides that a person can be given the power to enforce the trust.
Considerations should also be made for contingencies that could affect the validity of the trust. A trust drawn up in one state might not ultimately be administered in that state, and the state wherein the trust is administered may not have a pet trust statute. Tthe trust should include language that will protect the intent and provide contingency instructions in case the provisions of the trust are deemed invalid.
Another example of contingency planning involves anticipating problems arising due to the rule against perpetuities. Pet trusts in some states are only valid for a certain number of years, usually twenty-one, which is sufficient for the majority of dogs and cats. Such limitations on trust duration, however, may create difficulties when the animal to be cared for is longer-lived, such as a horse, turtle or tortoise, or certain types of birds and fish. Thus, depending on the types of animals involved, the practitioner may have to devise a plan for continuing care beyond the duration of the trust.
Lastly, the eccentricities of some pet owners may seem extreme to an outsider and raise the issue of mental capacity. The practitioner should anticipate such challenges and include contingency language.
The idea may cross your mind to forgo the formality of a pet trust and simply bequeath money to a person with an informal understanding that it be used for the care of a pet. What this becomes, however is an issue of inheritance and property taxes - including a tax on the value of the animal - which would deplete the amount of money available for the pet's care.
A trust is taxed on the income it accumulates. A pet is not a beneficiary recognized by the Internal Revenue Service and therefore cannot be taxed. The trustee cannot be taxed because he is merely an agent of the animal beneficiary and does not consume the trust distributions for his own benefit. The IRS has closed this potential loophole by holding that in jurisdictions where pet trusts are enforceable, the trust will not be credited with the distribution, but is liable for the distributions as if the distribution were not made. The pet trust is, however, taxed at a rate which is much lower than that of the average trust.
Another option is a conditional bequest, which could be made to a person under the condition that the money be used for the care and maintenance of the pet. A court might uphold such a conditional bequest, perhaps finding a contract or constructive trust, or it might void it, in which case the bequest might be held unconditional or the bequest might be invalidated altogether. The outcome of a conditional bequest is more uncertain than that of a well-drafted pet trust.
There are a growing number of university veterinary schools who have devised a Perpetual Pet Care program. Under this plan, a pet owner can fund an endowment scholarship for a veterinary student. The student then takes care of the pet after the pet's owner dies. These programs often promise that the owner can be specific in a great many of the details on how the pet will be cared for. It is expensive and typcially the cost to participate in this type of program, at the time of this writing is $25,000. What remains unclear is how the owner's wishes are enforced.
Lastly, another possible option may be breed rescue organizations. Many rescue groups are willing to care for a pet that meet the criteria of their breed. Contact the breed rescue in your area and make an inquiry.