PET TRUSTS
INTRODUCTION
Almost all states have enacted pet trust statutes authorizing the creation of trusts for pets. The New York Legislature passed its pet trust statute in 1996 to permit perople to create enforceable trusts for the care of domestic or pet animals (Estates, Powers and Trust Law Article 7). Additionally, the Uniform Probate Code and the Uniform Trust Code each have sections authorizing pet trusts.
It is important that you have an attorney who is not only knowledgeable about the law but also loves animals. If you have pets, your estate plan is not done without a plan for your pets, even though you might already have an otherwise-proper estate plan (will, Living Will, Health Care Proxy, Power of Attorney, and Power of Attorney gift rider). Remember that estate planning wishes should be unambiguously expressed in the will and/or trust, without other documents contradicting such wishes, such as a "Mission Statement". Additionally, all proper steps must be taken to validate the Estate Plan, so that someone cannot later come along and say the documents are invalid due to witness signature issues, the person not being of sound mind, and all the other arguments even non-attorneys have heard of (just check www.TMZ.com), yet they still come up without careful planning.
We know this and how to take care of your pet(s) properly. There are ways to give your pets the best life possible after you are gone (well, the best life possible without you there). Every person with a pet, or planning to adopt a pet(s), should have a pet trust. They are not pricey; in fact, I draft them pro bono when drafting a complete estate plan because I think this is so important. I have seen MANY MANY dogs and cats brought to the shelter after their owner(s) died, and these poor furbabies were already heartbroken to begin with. Going from a warm, loving, clean, quiet home, regular walks and/or a yard, a deck to sun on, etc. to a smelly, dirty, noisy shelter and being stuck in a cage 24/7 is torture for them, and looking into their eyes, you cannot help but cry. Often, they are put to sleep, and not the way your trusted vet would (gassing is still legal, and some shelters cut corners...without being too blunt, think "using the freezer to finish".).
http://www.animallaw.info/statutes/stusnyest_pow_trst7_8_1.htm
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FUNDING A PET TRUST
You can fund the trust during your lifetime (inter vivos) or after you pass (in your will). However, if you provide for your pet(s) only in the will, there is usually a gap between your passing away and settling your affairs, whether or not the estate needs to be probated. I usually recommend to my clients not just the intervivos Pet Trust but also interim provisions, such as a joint account with the person caring for the pet.
TAXES
The attorney and accountant must keep taxes in mind when drafting any estate plan. The executors of Helmsley's estate had to petition the Surrogate's Court for permission to reduce the amount passing to the pet trust to $2 million in order to substantially reduce estate taxes. The executors petitioned the court under New York's pet trust statute [NY EST POW & TRST § 7-8.1 (d)],
which provides that the court can reduce the amount passing to a pet trust if it determines that the amount substantially exceeds the amount required for the intended use. The excess passes to the remainderperson of the trust. Thus, the court ordered the decrease to $2 million.
In general, when providing for the care of an animal, a pet owner should leave only a reasonable amount for that care. In most cases, $2 million would be substantially more than is needed to care for one dog. But special circumstances existed for Trouble, related to the media blitz about the $12 million pet trust. After the publicity, it was reported that more than 40 death and dognapping threats were received, and that the dog was in such danger that she was taken out of her Connecticut home and flown under an assumed name to a secret location. Round-the-clock security was needed for the dog, which costs between $100,000 and $200,000 a year, and that amount is much more than any other expense for the care of the dog. Since security costs are so high, $2 million was considered to be a "reasonable" amount to fund the trust for Trouble.
More commonly, a large amount may be needed to fund a pet trust if the pet owner has many animals and wants the animals to live together in the family home with a caretaker. Leaving the house to the trust (or the executor/trustee/caretaker) solves the difficult problem of finding homes where all of the animals would live. The residence is placed into the trust, along with enough liquid assets to maintain the residence, including Long Island’s high taxes, and to pay a caretaker, as well as the costs of animal care, such as food and veterinary bills. Some pet owners direct that the residence be sold and a less expensive residence be purchased or leased by the trustee where the animals and a caretaker could live together.
Putting the testator's residence in the trust in some cases may be the best way to properly care for the animals if it is the testator/pet owner's intent that the animals remain together in familiar surroundings. Similarly, with large animals, such as horses and farm animals, a pet owner may want to put a farm into the trust, and hire a caretaker to live on the property. This may be the best way to assure the proper care of these animals during their lives. There are no cases to date on whether putting a residence or farm into a pet trust would be considered "excess" funding but if such a case should arise, we would find out quickly and update this website.
PLACE PET IN THE TRUST
In her will, Helmsley bequeathed Trouble to her brother, but he did not want the dog. A person who is bequeathed an animal under a will does not have to accept such bequest, but if he does, he becomes the new owner of that animal and has all the rights of ownership, including the right to take the animal to a veterinarian to be euthanized. Because these risks exist, it is wise for a pet owner to bequeath the animal to the pet trust because there, the trustee has a fiduciary duty to safeguard “property” in the trust. Animals are property under the law (most of NY’s Animal Abuse Laws are in the Agriculture and Markets Law) and so can be part of a trust, along with other forms of property.
TYPES OF TRUSTS
A pet trust can be an inter vivos trust, created during the life of the pet owner. Or it can be a testamentary trust under a will, effective after death.
An inter vivos trust has the advantage of being immediately available for the care of an animal if the pet owner becomes incapacitated or passes away. However, the inter vivos trust has the disadvantages of being more expensive to create, and in some cases, if not properly set up, of not being adequately funded (or not funded at all) at the time of incapacity of the pet owner. This can happen if the person's assets are tied up, such as in the home, obviously the life insurance policy, if any, takes a while before the insurance company will release funds, and she/he was using Social Security and/or pension payments, which terminate at death, to care for herself and the pet(s). If the pet owner wants an inter vivos trust, it is wise to have some method of back-up funding (e.g. pay on death checking account and life insurance) to avoid the risk of having an unfunded, and thus useless, trust at the time of death.
A testamentary pet trust is funded under the will. The disadvantage of a testamentary trust is that it will not be in effect during periods of disability, so pet owners should have their attorney execute a power of attorney appointing an attorney-in-fact to handle the owner’s financial and personal matters (including a specific provision authorizing the payment of the costs of care of the pet owner's animals) to be used if the pet owner becomes incapacitated. We recommend a power of attorney anyway as one of the five essential documents everybody should have (will, living will, health care proxy, and power of attorney gift rider, with a sixth, the Pet Trust, for pet owners ). As discussed above, the attorney should also draft a plan for the care of the pet during the period from death to the settlement of the will during probate.
GENERAL TIPS
As with many situations, such as guardianships for mentally challenged humans, plans for one's minor children, etc., there should be several alternates (back-ups).
If you do not know anyone suitable, there are many animal rescue groups that can take your pet into a foster home and let the pet live out his/her life span. Of course, you want to leave them $10K, $15K or more. If you think so highly of the organization, you want to leave them sufficient funds to care for your pet(s) and help others but you want to avoid situations with there being too much, and some parties being motivated to argue against it. *
You may wish to prepay a high-coverage veterinary insurance policy for the pet, and I often recommend this to older clients and/or clients with serious medical issues, even if normally I would not recommend these to most people and for all pets (I have pet insurance for some dogs of mine, but not others). This is especially true if your pet(s) has a medical condition(s), and you are the type of person who would not balk at $2,700 for knee surgery for the pet. Some trustees may decide surgery is too expensive and neglect to give the pet care while she suffers, let’s say, from a torn ligament or just euthanize the beloved pet even when surgery readily would have fixed the pet's medical condition(s).
CONCLUSION:
What matters is that you choose an attorney who not only knows the law but is an animal lover with experience in animal rescue work. These types of attorneys have seen the ramifications of lack of proper estate planning for a decedent's pet(s) and can readily spot issues. Pets should always be included in one's estate plan, annd the attorney you choose must subscribe to that ideal.
* One of the websites that tracks charities: http://www.charitynavigator.org/
