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Abigail O'Connor is Senior Counsel in Holland &
Knight's
Anchorage office.
Many families today view their pets as part of the family.
Sometimes the pets rank even higher than children and
grandchildren. As part of estate planning, a growing number of
people desire to ensure for the continued care and safety of their
pets using trusts. Every state in the U.S. now has a statute that
authorizes pet trusts, although the restrictions vary.
Pet Trusts often are incorporated into a person's will or
revocable (or "living" trust), or they can stand on their
own. As with other trusts, someone is appointed as the trustee, and
the trustee is financially responsible for the pet's care. At a
minimum, a pet trust should address the following issues:
The Trust should appoint a custodian for the pet (or pets). The
pet owner should consult with the custodian before preparing the
trust and confirm that the custodian will be willing and able to
care for the pet. The trust should provide for the selection of
alternate custodians if the initial custodian (or a successor)
fails or ceases to serve. The custodian can be the same as the
Trustee; however, keep in mind that, in such a case, there will be
less oversight over the care of the pet. Remainder beneficiaries,
discussed below, likely will be more concerned over the financial
aspects of the Trust, rather than the pet's well-being. The
best practice would be to have different people serve as Trustee
and custodian.
The Trust will need funding to care for the pet. The funding
can come from the client's estate, trust, or even life
insurance. Make sure that the trust includes adequate funding to
care for the pet (or pets) during its (or their) lifetime(s). Do
not put the financial burden on the custodian.
Where will the custodian and the pet live? If the custodian
rents an apartment or a house, will the pet be permitted to stay
there? If the Trust has enough resources, a provision providing for
housing expenses, or even the ownership of a house, will provide
added comfort.
The Trust should provide for the care and maintenance of the
pet. A generic distribution standard such as "care,
maintenance, and support" is typical language for
"people" trusts, and rather broad. If desired, the owner
can provide additional guidance for what expenses should be
covered, such as veterinary and hospital expenses, food, grooming,
and items such as bedding and toys. In addition, the Trust may
provide for services such as pet sitting.
As a way to oversee the custodian and confirm the well-being of
the pets, the custodian should be required to arrange for at least
annual veterinary care and checkups. The trustee should be required
to review reports, or otherwise inquire as to the pet's health
at least annually, if not more often. The Trust may designate a
particular veterinarian, but if it does, it should provide for the
selection of an alternate.
Sadly, most pets do not live very long when compared with
humans. Yes, there are some exceptions, such as a few types of
exotic birds. The Trust should provide the terms for euthanasia,
especially as the death of the pet (or the surviving pet) will
cause the Trust to terminate.
To incentivize the custodian, the Trust should provide for
compensation for the custodian. The amount of compensation depends
on the circumstances, and what else the custodian receives from the
Trust. For example, if the Trust provides for housing, then the
compensation may be reduced.
Once the pet or surviving pet passes away, the Trust must
provide for the disposition of any remaining assets. Generally, the
remainder beneficiaries will be entitled to trust accountings
during the life of the pet, unless the Trust provides
otherwise.
Caution should be taken to guarantee the pet's identity.
Microchips are an easy solution, although there is at least one
story of microchips being removed from a dog, so it is possible
that even a microchip will not stop a nefarious pet caregiver. Now
the ability to clone a pet adds even further vulnerability.
Pet trusts can be subject to challenge in court, so they need to
be carefully drafted. For example, the real estate tycoon Leona
Helmsley, in her estate plan, tried to leave $12 million for a
trust for her dog, Trouble. That gift was challenged, and
ultimately the court reduced the gift to Trouble's trust.
The important takeaway here is that planning for pets is very
possible. Planning can be done with a will, or a trust, or even
another arrangement outside of these two most common estate
planning documents.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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