Clients Should Include Pets in Estate Plan
What if Fido or Fluffy outlive your client?
Have your clients made plans for what happens to their “furry children” if they die or become incapacitated? Or are they just assuming someone will step in and give their animals the same level of care and attention? As advisors, it’s important to discuss animals care as part of your clients’ estate plan.
In the past, people made designations for ownership and care of their pets in a will, but their wishes were not enforceable. However, pet trusts are gaining more ground in the courts and are becoming more prevalent with clients who have no adult children as beneficiaries of their estates.
Why a Pet Trust?
In our experience, we’ve seen pet care addressed in a will, a living trust, or a stand-alone trust. While a will does not apply until the owner dies, a pet trust can be applied if the owner becomes incapacitated, and for this reason, they are becoming more common.
A recent article on Care2.com highlights the importance of pet trust documents as part of an estate plan and includes some great suggestions on what a pet estate plan should include, such as details on a pet’s health issues, medications, and special diets.
Though some animal welfare groups also have programs to care for pets who outlive their owners, these are not available in every state, and the owners wishes regarding the specific ways they want the pet to be cared for are not legally enforceable.
How a Pet Trust Works
A pet trust ensures that a trustee will watch over the way the money is spent by the designated caretaker. We advise appointing separate people for these two roles so there is a check and balance. Clients should also designate a remainder beneficiary, a person or organization to receive any left-over money after the pet dies. We advise against leaving it to a caretaker in order to avoid incentivizing the pet’s early demise.
Pet trusts are often more detailed than even those for children, specifying exactly how the pet is to be cared for – feeding schedules, grooming, exercise, and even specifying that pets who were living together not be separated after the owner’s death.
How Much Should be Set Aside?
While your clients might have a well-meaning, animal-loving relative or friend who would be the best candidate for taking on the care of a beloved pet, they don’t want to create a hardship for that person by not providing enough money to cover the animal’s expenses for veterinary care, food and other re-occurring purchases (i.e. pet licenses, pet beds, grooming, and flea and heartworm preventatives).
Large animals like horses or long-lived ones like parrots can incur even greater expenses than a typical dog or cat. Have your clients taken this into account when creating a plan for their care?
Wealthier clients might set aside their house and a caretaker for the life of the pet with instructions, and much larger amounts may be left in trust for horses or longer-lived animals like parrots.
However, clients may run the risk of having the trust contested in court by heirs and remainder beneficiaries if the amount is deemed unreasonably large, and the court could reduce the amount of benefits the pet receives. This is what happened with billionaire Leona Helmsley’s estate, which she left to her dog, Trouble.
Some states have enforceable pet trust laws, allowing people to petition the court if they have reason to believe that the animals’ welfare is not being properly cared for. However, not all states have the same enforcement laws. That is why clients should ensure checks and balances in the trust in order to make sure that their wishes are followed.
The more specific people want to be about their wishes, the more they need an attorney to draft out a formal pet trust.
We recommend that you discuss pet trusts with your clients as one more part of their estate plans. If a designation has been made in a will, discuss the possibility of making a pet trust instead so that their wishes carry legal weight.
To get more information regarding this or any related topic, please visit our website www.TEPLG.com or call us at 630-871-8778.