(Source: NYTimes): Judy Mandell – My husband and I are crazy about our puppy. He is not just a pet — he’s a member of our family. At 6 months, Burly has many years ahead of him.
But what if something happens to us? How can we be sure he will be taken care of when we’re no longer around? I discovered that there are several options we can take to safeguard our dog when we are gone. Here’s what I learned.
A Will May Not Be Enough
You can ask a relative or trusted friend to take care of your pet if you are no longer able to do so. But although that person may agree to take him, there’s no guarantee that he or she will follow your wishes. Also, that person may become ill or die, and the dog or cat could end up in a shelter.
That’s why it may be critical to talk to a lawyer about drafting a will. Find one who specializes in estate planning and understands the laws where you live, as they differ from state to state.
If you have complete trust in the caretaker you have named for your pet (lawyers refer to them as custodians), you can leave him or her a monetary gift in your will. Note, however, that it will be considered income for the recipient, so there may be tax implications. Also choose alternate caregivers in case the designated person can no longer keep your pet, and discuss this with them beforehand as well to make sure they are willing to take on the job.
There is usually a waiting period for a will to be executed after someone dies, so leaving your pet without a care plan for weeks or months while the will is probated leaves the pet in limbo.
To safeguard this, a letter of final wishes should be included in the will, specifying someone who will care for the pet immediately upon the death or incapacitation of the owner.
Consider a Pet Trust
Naming your beloved pet as a beneficiary in your will may not be enough. A pet trust is a legal way to provide for your pet and is the only option that allows you to directly give pets anything, since many states consider them personal property, no different from your fine jewelry, antiques, computers or cars.
“To put this another way, imagine trying to give Fido $5,000,” says Liza Hanks, author of “Every Californian’s Guide to Estate Planning” (Nolo 2018) and partner at GCA Law Partners in Mountain View, Calif. “Could he open a bank account? Write a check? Sign himself up for doggy day care? No to all of these things. So pet trusts are an invention to try and solve that problem.”
In addition, while a will takes effect only after you die, a living trust can be executed when someone is alive but incapacitated.
With pet trusts, a trustee is appointed to hold property and cash and make payments for the benefit of the pet upon the death or disability of the granter. Trusts continue for the life of the pet or 21 years, depending on which comes first, although rules may vary by state.
“Unlike a simple directive in a will, a pet trust has several advantages, including validity both during life and after death, protection from contests to the estate, and a set-forth agreement regarding the control and disbursement of funds,” says Christina Gustin, account vice president and financial adviser with UBS Wealth Management.
According to Susan Bart, an estate planning lawyer and member of the private clients, trusts and estates group at Schiff Hardin in Chicago, sometimes it’s better not to give direct ownership to the custodian, but rather to have the ownership of the pet stay in the trust, and authorize the trustee to manage the funds, make distributions and also play the role of “enforcer.”
“As an enforcer, the trustee would be authorized to make house visits, speak to the veterinarian, and make sure they understand how the money is being spent and that the pet is well cared for by the appointed caretaker,” says Ms Bart. “The trustee should have the power to replace the custodian with a new one.”
Scott Schepps, a wealth planning attorney in the Houston office of Jackson Walker LLP law firm, has seen people direct the executor to continue keeping the house where pets live in the estate until all the pets die and to pay a person to live there as the caretaker.
In one case, a sizable $1 million home basically became a very large cat house for the more than 10 cats the owner had at the time of death. “Most pet parents believe their pets will outlive them,” says Mr. Schepps. “The ‘caretaker’ was paid $50,000 per year to live in the home with the cats.”
In another case, a pet owner left his black Labrador retriever to a person and told the bank/executor to pay the person $25,000 a year as long as the dog was alive. After about 25 years, the bank figured out that the original dog was long gone and had been replaced by a second (or possibly third) black Lab so that the person could continue to receive the $25,000 annually.
Erach Screwvala, a New York estate-planning lawyer, has seen extreme requests and provisions.
One client asked him to include a wardrobe of designer outfits for pets in his will. Because the total value of the clothing items was high, valued at approximately $12,000, Mr. Screwvala considered this a wise move. He was asked by another client to include a provision for a custom-made wooden coffin for their cat. His most memorable request was when he was asked to include a diamond-studded dog collar and leash set in a client’s will.
“This was, without doubt, a unique request, but again, was very wise given the value of the diamonds,” says Mr. Screwvala. “As the set was made from real diamonds, it was extremely valuable and something that could be passed down to future generations for future dogs in the family to enjoy.”
Mr. Screwvala does not grant every request made by his clients. “My job is as much to advise as it is to draw up the paperwork,” he says. “I also had a request to include a dog collar encrusted with factory-made diamonds, which I advised against, as synthetic diamonds are of no inherent value. They are produced in a factory in a couple of weeks, which means they are neither precious nor rare, so it doesn’t make sense to include items of this nature in a will. I would also stay away from including overtly ridiculous food provisions, such as ‘filet mignon steak only,’ or something that might be hard to fulfill for the caretakers.”
Dos and don’ts for Pet Estate Planning
Ms. Bart and another estate planning lawyer at Schiff Hardin, Brian Janowsky, offer these dos and don’ts.
■ Create a will that names someone to take ownership of your pet at your death.
■ In the case of incapacity, create a durable power of attorney that allows a designated person to use your funds to care for your pet. Alternatively, or in addition to a durable power of attorney, consider the use of a revocable trust funding. If your estate plan includes the use of a revocable trust — a living trust that can be amended during life and that is often used to manage assets and avoid probate at death — make sure the trust authorizes the trustee to use the funds for the care of your pet.
■ If you want supervision of the care of your pet, consider the use of a pet trust to ensure that your pet has both the financial support required to live its best life and an enforcer to ensure the pet is well cared for after you are gone. Don’t just plan for your current pet; consider that you might have more pets in the future.
■ Consult with an estate-planning lawyer to discuss the best vehicle to create the pet trust: (1) under your will; (2) under a revocable trust (which allows you to make changes); or (3) under a lifetime irrevocable trust (the terms of this type of trust cannot be changed).
■ Don’t forget to consult with the person(s) you name to take ownership of your pet and to act as trustee of a pet trust. Confirm that they are willing and able to take on the obligation.
■ Don’t underestimate the importance of having a will. Otherwise, your state’s laws will dictate who receives your property. Since your pet is considered property, he or she could end up in the hands of an unwilling or minor owner and ultimately could be placed in a shelter.
■ Don’t leave unreasonable sums to your pet. The sum placed in trust will vary based on the type of pet and its specific needs and life expectancy. Talk to your veterinarian and your estate-planning lawyer.
■ Don’t forget to provide clear direction for where the remaining pet trust funds should go upon the pet’s death. To deter individual heirs from challenging the sum left to a pet trust, many choose to leave the remaining property to an animal welfare organization.