Estate Planning for Pets
“Near this spot are deposited the remains of one who possessed Beauty without Vanity, Strength without Insolence, Courage without Ferocity, and all the Virtues of Man, without his Vices. This Praise, which would be unmeaning Flattery if inscribed over human ashes, is but a just tribute to the Memory of Boatswain, a Dog.”
According to the Humane Society of the United States, sixty-two percent of U.S. households have a pet. Many pet owners treat these pets as true members of their families. They buy them special clothing, get them professionally groomed at day spas, buy gourmet pet food, and take their animals for frequent check-ups at the vet. As put by Henry David Thoreau, ” It often happens that a man is more humanely related to a cat or dog than to any human being.”
Small wonder, then, that these pet owners want to make sure these pets are cared for after the owner dies. Traditionally, the pets themselves could not be beneficiaries of the owner’s will. The pet itself could be bequeathed to someone since the pet is tangible property, but any money for the pet’s care had to be given to the new owner with the hope that it would be used to take care of the pet.
See Protecting Your Pet in the Event of Your Disability or Death by Audrey Buglione, Esq. at Pennsylvania Animal Law Blog.
One solution was for the pet owner to set up a trust with the pet’s caretaker as the beneficiary. The caretaker received trust distributions so long as the pet was living and the caretaker was taking adequate care of the pet. Another party acted as trustee to enforce the terms of the trust by managing the funds and by having the power to move the pet from one caretaker to another.
The Uniform Trust Code (UTC), adopted by Pennsylvania recently to be effective on November 4, 2006, introduces a new concept and makes it possible to make a trust for the benefit of a pet where the pet is treated as the beneficiary. Under the terms of the UTC, a trust may be created to provide for the care of an animal alive during the settlor’s lifetime. The trust terminates upon the death of the animal or, if the trust was created to provide for the care of more than one animal alive during the settlor’s lifetime, upon the death of the last surviving animal. The law provides that the trust property is to be applied only for the care of the animal. It is very important to make a gift of the remainder to some other person or charity. If the trust terms do not provide for remaindermen, the remainder interest will be distributed through a resulting trust to the settlor, if living, or the settlor’s estate. There won’t be any millionaire kitties eating out of crystal on silver trays. According to Marilou Gervacio, writing for UTC Notes, the average amount put into such trusts has been said to be about $25,000 per animal.
Who pays the income taxes on the trusts investments? If the caretaker is considered a beneficiary of the trust (which is the case for common law trusts, not pet trusts under the UTC) then the caretaker reports distributions from the trust as income on his or her personal 1040 to the extent they carry out trust income. Revenue Ruling 76-486 provides that if the pet is considered the beneficiary of the trust (which is the case in a pet trust under the UTC), the trust gets no deduction for amounts distributed for the pet’s care and the trust must pay income taxes on earnings. Note that the trust does not qualify as a charitable trust even if the remainder beneficiary after the death of the pet is a charity.
Your pet needs care if you become incapacitated, too. Your power of attorney can include language directing the agent to care for the principal’s pet and expend amounts necessary to provide such care. This could be important if the agent’s actions are challenged as violating the duty of the agent to expend sums only for the benefit of the principal.
Professor Gary Beyer, of the Texas Tech University School of Law wrote an article called “Estate Planning for Non-human Family Members” in which he advises that in addition to setting aside funds for the care of your pet, you need to make sure the relevant people know what should be done with your pets if something happens to the owner suddenly.
Professor Beyer next recommends that the owner should prepare an “animal document.” This document should contain information about the animals, their care needs, and who will take care of them, and perhaps additional details as well. This document is intended to be kept in the same location where the pet owner keeps his or her estate planning documents.
Finally, the owner can provide signage regarding the pets on entrances to the owner’s home to alert individuals entering the home that pets are inside. The signage is also important during the owner’s life to warn others who may enter the dwelling (e.g., police, fire fighters, inspectors, meter readers, friends) about the pets. The Humane Society of the United States supplies cards and signage alerting others of the existence of pets and information regarding their care.
How do you know the pet that is the trust beneficiary is still alive? Certainly, the pet needs to be identified. Beyer cites a report that “[a] trust was established for a black cat to be cared for by its deceased owner’s maid. Inconsistencies in the reported age of the pet tipped off authorities to fact that the maid was on her third black cat, the original long since having died.” Veterinary records and photographs are helpful. It has been suggested that the pet could be tattooed. Although this could later “cause problems” for the pet because a pet thief could mutilate the pet to remove the tattoo, such as cutting off an ear or leg, if the pet’s primary function is breeding. (Indeed!)
A microchip can be implanted in the animal and the trustee can then have the animal scanned to verify that the animal the caretaker is minding is the same animal. But, an enterprising caretaker could surgically remove the microchip and have it implanted in another physically similar animal.
How far can this go? It is suggested that the best, albeit expensive, method to assure identification is for the trustee to retain a sample of the animal’s DNA before turning the animal over to the caretaker and then to run periodic comparisons between the retained sample and new samples from the animal. (Whew!)