Naming Your Pets in Your Estate Plan
The purpose of this article is to advise our clients how they can provide for their pets within their Estate Plan and to assist our clients with carrying out their wishes with respect to their pets.
The American Pet Products Association estimated that in 2012, approximately sixty-eight percent (68%) of households in the United States owned pets. Furthermore, only nine percent (9%) of dog owners and nine percent (9%) of cat owners accounted for their pets in their Estate Plan and only twenty-seven percent (27%) of pet owners who have an Estate Plan included provisions for their pets. Since most of these pets are treated as family members, it is important to include them in your Estate Plan.
Historically, Trusts could not be enforced in favor of animals because there was no human beneficiary to enjoy the Trust. These were considered “honorary Trusts” because the Trustee could not be compelled to provide for the animal. However, the California legislature responded and clarified by enacting Probate Code Section 15211 and 15212 in 1991.
Probate Code Section 15211 provides that a Trust for a lawful non-charitable purpose (such as the care of a pet) may be performed by the Trustee for only twenty-one (21) years, whether or not there is a beneficiary who can seek enforcement or termination of the Trust and whether or not the terms of the Trust contemplate a longer duration.
Probate Code Section 15212 provides that a Trust for the care of a designated domestic animal may be performed by the Trustee for the life of the animal, whether or not there is a beneficiary who can seek enforcement or termination of the Trust and whether or not the terms of the Trust contemplate a longer duration. This section allows you to create a Trust for the duration of your pet’s lifetime.
The first step to providing for your pet is to compute the amount of resources necessary to care for the pet. You should take into consideration the type of animal, the life expectancy, veterinary care and funds for boarding the pet while the caretaker is on vacation or otherwise unable to care for the pet.
The second step is selecting the person to care for the pet. You must find a caretaker who is willing and able to care for the pet much in the same way as you would. Clearly, it is necessary to obtain the caretaker’s consent to act in this regard, prior to naming him or her. It is also recommended that you name one or more alternates, and give your Executor or Trustee the authority to select a good home for the pet if the named caretakers are unable or unwilling to take the pet.
The third step is deciding whether to give an outright gift of the pet to the caretaker with a reasonable sum to care for the animal (which is conditioned on the caretaker taking proper care of the animal) or to create a Trust in favor of your pet under the umbrella of your Revocable Living Trust or your Will. Both options go into effect upon your death and accordingly, are irrevocable after your death. With the second option, the Trustee distributes funds to the caretaker to cover the pet’s expenses, provided that the caretaker is taking good care of the pet. We recommend that one (1) person care for the pet and another person manage the money to avoid any potential conflict of interest.
If you intend to set aside an amount larger than twenty thousand dollars ($20,000.00) for your pet, a Trust is the preferred method. This method is preferable since your intent is more likely to be honored when the Trustee manages the assets and makes sure that the animal is being cared for while the caretaker makes sure that the Trustee is properly distributing funds for the benefit of the pet. To that end, you should direct that your Trustee or a pet care agency (SPCA, Humane Society, etc.) regularly make random unannounced visits to make sure that the animal is in good health and properly cared for. In sum, this method is more predictable and creates a system of checks and balances.
It is important to specify the type of care that the Trust is being held for, such as food, housing, grooming, veterinary care, and burial or cremation. There was one (1) extreme case wherein the Trustee purchased a vehicle for the transport of the animal and a washing machine to launder the pet’s bed. The court found these to be inappropriate expenses of the Trust and that they benefitted the Trustee more than the pet. In order to avoid this type of confusion, you can specify the type of care that you intend to cover. There is also the method in which the distributions will be made to the caretaker. You can direct that the Trustee distribute a fixed sum of money each month to the caretaker, or you can state that the caretaker is to be reimbursed once a month for out-of-pocket expenses. Of course, the second option is more burdensome on the caretaker who will have to spend their own money first, and keep record of expenses. Within the Trust, you may provide additional distributions for the caretaker if you feel it is appropriate or beneficial to compensate the caretaker.
A Pet Trust also allows you to leave your home in Trust upon your death and a pet care organization (such as a SPCA or Humane Society) could select and screen a caregiver to move into your home with your pets for the balance of the pet’s lifetime. You can specify whether you wish the home to be sold on your death with the proceeds distributed to a pet care organization or to be continued for the use of the pet organization as a “safe house” for other animals who have lost their owners. In this case, additional checks and balances are in place as the Trustee manages the funds, a caretaker cares for the pet and the pet organization makes random welfare checks.
Under California law, the duration of this Trust is limited to the lifetime of your pet or pets. The Trust must clearly state to whom you want the remaining funds distributed, whether it be individuals and/or charities. It is not wise to name the caretaker as the remainder beneficiary since this creates a disincentive to extend the life of the animal.
Any Trust is taxed on the income it accumulates. Because your pet is not a beneficiary recognized by the Internal Revenue Service (IRS), it cannot be taxed. The Trustee cannot be taxed either since he does not hold beneficial title. In jurisdictions such as California where Pet Trusts are enforceable, the IRS has held that the Trust will not be credited with the distribution, but is liable for the distributions as if the distributions were not made. The good news is that the Pet Trust is taxed at a lower rate than the average Trust.
In every instance, you must clearly identify the animal in your Will or Trust so as to prevent fraud. There is at least one (1) reported instance where an unscrupulous caretaker had replaced a deceased animal three (3) times so as to continue receiving distributions from a Trust. You can and should describe your animal in detail and get a microchip placed in your pet so that your Trustee can have a veterinarian or pet care agency scan your pet to verify its identity.
A final alternative to setting up a Trust or leaving an outright gift to a caretaker is to take advantage of a program through the Sacramento Society for the Prevention of Cruelty to Animals (SSPCA), San Diego Humane Society (SDHS) or The SPCA for Monterey County, or a similar organization. Please contact the Sacramento SPCA at (916) 383-7387 ext. 9105 for more information on their Guardian Care Program, SDHS at (619) 243-3443 for more information on their Pet Guardianship Program, The SPCA for Monterey County at (831) 373-2631 for more information on their Guardian Angel Program or a similar organization for more information to determine if your pet would qualify for such a program.
If making such a provision in your Will or Trust interests you, or if you have any questions, please feel free to contact DROBNY LAW OFFICES, INC., where we have been assisting clients in the preparation and implementation of Pet Trusts for over twenty (20) years.
This testimonial or endorsement does not constitute a guarantee, warranty or prediction regarding the outcome of your legal matter.