Taking Care of Your Pet After You Are Gone
When real estate mogul Leona Helmsley died, she earmarked $12 million for the care of her white Maltese lapdog, Trouble. Fashion designer Karl Lagerfeld left $1.5 million for his cat, Choupette. And a recently deceased New York City woman put $100,000 in a trust for her 32 pet cockatiels along with instructions that they be fed natural birdfeed, carrots and popcorn.
It’s easy to snicker about estate planning for an animal. But if you regard your pets as important members of your family, you may want to ensure that they are provided for after your death. The challenge: Under the inheritance laws in all 50 states, pets are considered tangible personal property, no different than a car or jewelry. You cannot directly leave money to an animal in your will.
To help you make sure your pets remain safe and loved when you are no longer around, Bottom Line Personal spoke to attorney Peggy Hoyt, JD, who has helped create hundreds of trusts, wills and estate plans involving pets.
Estate Planning For Your Pet
Only about 9% of cat and dog owners have made financial provisions in their estate plans for their pets. If you don’t make arrangements, your state’s estate succession laws and probate courts could eventually decide your animal’s fate. Worst-case scenario: Your pet could wind up in a shelter or be euthanized. Here are three common mistakes I see pet owners making….
Mistake #1:
Assuming your family or friends will step up and take care of your pet. These kinds of informal inheritances often backfire—even if all the parties involved have good intentions. Reason: Your loved ones may express affection for your pet while you are alive, but that doesn’t mean they’re prepared to make a long-term commitment or provide the same standard of care you did. Examples: You leave your dog to your son, then he moves into a building where pets aren’t allowed…or a dear friend takes your cat, but her own animals don’t get along with the newcomer. In one very sad circumstance, an elderly couple owned a beloved Weimaraner. After her husband died, the widow realized the dog was just too strong and energetic for her to care for on her own.
If you cannot find a suitable caregiver for your pet: Ask your local shelters and other rescue and humane societies if they have or know of “Perpetual Care” programs. In exchange for a donation of a few thousand dollars, these institutions will care for your pet after your death until the animal can be placed in a suitable home.
Mistake #2:
Leaving your pet to someone in your will along with money for the animal’s care. This is the simplest legal avenue to ensure your pet is provided for, but it’s problematic. Provisions in your will go into effect only when you die, not if you are disabled or have to go into a nursing home and can no longer care for your pet. Also, any money you leave to the person who inherits your pet is considered an irrevocable gift—and the beneficiary has no obligation to use it for your pet’s benefit. Finally, wills typically go through probate—a lengthy court process during which an estate is settled. It could take months before the money to care for your pet is distributed.
Mistake #3:
Lack of transparency about your pet estate plans. No matter what you decide, don’t keep your family and friends in the dark, especially if you leave a substantial amount of money for your pet’s care. Discussions about money and death tend to be difficult topics in families, even more so if you fear criticism for leaving one of your children an extra $15,000 to take care of your dog. It is your money to distribute how you please, but there is a much higher likelihood that your plans will be contested in court or instigate an ugly family feud if your estate plans are a surprise to your beneficiaries after your death.
Best Option: A Revocable Living Pet Trust
This is the best way to provide one or more pets with lifetime love and care, and endow them with legal rights that can be protected and enforced. A pet trust works in much the same way as a trust for a child. You, the grantor, pick an individual you know and trust to become the pet’s new owner. You fund the trust by placing money into a separate account in the trust’s name, either while you are alive or by making the trust a beneficiary of your will. You can make changes to the trust until your death or until you become disabled and unable to care for your pet. At that point, the trust activates immediately without having to go through probate. A trustee—a person you have chosen to oversee the trust—is legally responsible to act in the animal’s best interests…make sure the caregiver is following your wishes…and distribute the trust’s funds for the pet’s care. One big drawback: These trusts can be expensive, costing $2,000 or more in attorney fees to set up depending on the complexity of your situation and your animal’s needs. Note: You can also name a pet trust as the beneficiary of life insurance and retirement plans.
Caveats to create an effective pet trust and avoid problems…
Work with an attorney experienced with animal estate planning in your particular state. Pet inheritance laws can vary by location. Example: Pennsylvania requires a pet trust to end when the last pet benefitting from the trust dies…other states may cap the trust’s length to a certain number of years. To find an attorney: Ask your veterinarian or try Justia.com/lawyers/animal-dog-law to search for attorneys in your state.
Don’t choose the same person to be trustee and caregiver. Doing so can create financial conflicts of interest. Select a backup caregiver in case your initial choice becomes unable to care for your pet or does an inadequate job and needs to be replaced by the trustee. If your pet has extensive needs that you worry won’t be met, consider appointing an “animal-care panel” to provide additional oversight of the caregiver. The panel in my own pet trust consists of three dear friends who will informally observe how my animals are being treated and report any concerns to the trustee. In situations where you have trusts for multiple pets and/or caregivers involving substantial amounts of money, consider hiring a professional trustee such as a certified public accountant, attorney or trust company to oversee the funds.
Outline a care plan in your trust. Does your pet require specific food…or have grooming, exercise and medical care needs? Where should the pet be boarded if the caregiver goes on vacation? Be sure to address what to do about chronic-care issues since veterinary bills have skyrocketed in recent years. If your pet grows very ill, what are your wishes for the pet’s medical intervention, end-of-life care and burial?
Calculate how much money to put in the trust for your pet’s lifetime care. Analyze the amount you’ve spent annually on your animal over the past few years including food, treats, flea and tick prevention, and medical costs. Include any annual compensation you may have to pay to the trustee and caregiver for their time and effort. Multiply the annual cost by an estimate of how many years you expect the animal to live based on its average life span. Add a few extra years as a buffer for the higher health-care costs your pet is likely to incur as the animal gets older. Resource: The Pet Trust Fund Calculator at AnimalCare TrustUSA.org/free-downloads.
Careful: Avoid overfunding the pet trust. While trusts are not legally challenged as often as wills, some states such as Florida and New York give state courts leeway to reduce large trusts. For instance, the size of Leona Helmsley’s pet trust for her dog was reduced from $12 million to $2 million.
Designate a final beneficiary to receive remaining trust money if your pet dies earlier than expected. I typically recommend clients leave that money to charitable causes. Otherwise, there may be an incentive for your caregivers to withhold care from a sick pet or challenge the trust to get the leftover funds.
