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Opportunities with
Planning for Pets
For many clients,
pets are members of the family. These clients often say that
if something happens to them, they are more concerned with
what will happen to their pets than to their children or
spouse.
This issue of The Wealth Counselor examines the issues
surrounding caring for pets after the disability or death of
the pet's owner. Given many clients' feelings towards their
pets, and the costs of care and longevity of some types of
pets, this is an area where the planning team can
differentiate itself and provide real client value while
also generating additional revenue for multiple team
members.
What Will Happen to the Pets When the Owner Becomes
Disabled or Passes Away?
Most pet owners do not want their pets killed if something
should happen to them. However, without proper planning, the
death of the pet is almost certain in some areas. For
example, in some Nevada counties, if the client does not
provide for a pet by way of a trust, when the client dies
Animal Control must take the pet to the local kill shelter
if there is not a family member present who is willing to
care for the pet. Some kill shelters euthanize animals 72
hours after they arrive at the facility, making it virtually
impossible for anyone to adopt the pet. Clients can avoid
this unintended and unfortunate result by creating a trust
that names a caregiver for their pets.
Planning Tip: Research how your state or county
laws affect pets after the owner dies or cannot care for
the pet. Help your clients to provide caregiver
information to their local Animal Control so that, when
the time comes, Animal Control can contact the
caregiver(s) to retrieve the pet.
Planning Tip: Provide your clients with a Pet
Alert Card including the owner's name, number of pets,
and multiple caregivers' names and phone numbers.
Laminate the card and ask each client to place it in
their wallet behind their driver's license. If something
happens to the client, someone searching for their
identity will see the Pet Alert Card and know there are
pets that need care.
Providing for Pets Upon the Owner's Death
Outright Gifts
The law treats pets as property. Because property cannot own
other property, money and other property cannot be left or
transferred outright to a pet. One can transfer or leave
assets to a caretaker with the request that the caretaker
care for his or her pets. However, because the caretaker
receives the gift outright, no one is responsible for
ascertaining whether a pet is receiving the care requested
by the pet owner.
Once the caretaker receives the gift and the pet's owner is
gone or incompetent, there is nothing to stop the caretaker
from having the pet euthanized, throwing it out on the
street, taking it to a local kill shelter, or using the
assets in ways unrelated to the care of the pet. In
addition, once in the caregiver's hands, the assets are
exposed to the caregiver's creditors and they may be
transferred to a former spouse on the caregiver's divorce.
Statutory Pet Trusts
As of August 1, 2007, thirty-eight states and the District
of Columbia have enacted statues pertaining to pet trusts,
and others have legislation pending. (See
Beyer Animal_Statutes for a listing of all states' pet
statutes.) These statutes allow virtually any third party
designated by the terms of the trust to use the trust funds
for the benefit of pets.
Some state statutes specifically limit the terms of a pet
trust. For example, some states limit the amount of money an
individual can leave in trust for their pet. In those states
that have adopted the Uniform Trust Code's pet trust
provisions, the amount of money an individual can leave in
trust for a pet cannot exceed the amount required to care
for the pet over the term of the trust. The trust must
distribute any excess funds to the person(s) or charity(ies)
who would have taken had the pet trust terminated.
In making this determination, the level of pet care the
owner provided determines the endowment amount required to
provide care for the pet. Factors include: the cost of daily
care (food, treats, and daycare), veterinary care (yearly
teeth cleaning, shots, nail trimming, and emergency care),
grooming, boarding, travel expenses, and pet insurance.
Additional factors may apply in particular cases. For
example, horses are expensive to maintain and require
exercise, training, and a large tract of land; some birds
and reptiles have very long life expectancies; and care of
some pets will require construction of a special habitat on
the caregiver's property.
Traditional Trusts
Even if your state does not have a specific pet trust
statute, a pet owner can name a human caregiver as the
beneficiary of a trust, require that the distributions to
the beneficiary are dependent on the beneficiary caring
appropriately for a pet, and require the trustee to ensure
that the beneficiary is properly caring for the pet using
trust assets. This type of trust may be used without regard
to whether the state has a specific pet trust statute.
Planning Tip: Both statutory pet trusts and
traditional trusts allow the pet owner to provide
detailed requirements as to how the caregiver must care
for the pets upon the pet owner's disability or death.
Planning Tip: Will planning is inadequate for
pets because it does not address disability and because
of the time lapse between death and the will being
admitted to probate.
Funding Pet Care
Many pet owners do not have sufficient funds to properly
care for their pets after their disability or death. Life
insurance is one way to increase funds available to care for
pets after the pet owner's death.
Planning Tip: Life insurance that names a pet
trust or traditional trust as a beneficiary is an ideal
funding mechanism. If the client is concerned that
funding of a pet or traditional trust will reduce the
children's inheritance, the client can increase the
amount of life insurance and name as beneficiaries both
(1) the pet or traditional trust and (2) the children
(or a trust for the children's benefit).
Planning Tip: Financial advisors, when
determining wealth accumulation needs, should take into
consideration the care needs of a beloved pet. Use of
pet or traditional trusts to provide pet care also gives
the financial advisor the opportunity to continue to
manage the trust assets after the client's death or
disability.
Trust Terms
In addition to stating that it is the client's intent to
create a trust for the benefit of (or to provide funds
adequate for the care of) his or her pet, the trust should
specifically name a succession of caregivers/beneficiaries
and a separate trustee to ensure that the serving
caregiver/beneficiary is properly caring for the pet. The
trust should also allow the trustee to reimburse the
caregiver/beneficiary for all pet expenses with proper
documentation, have access necessary to determine whether
the pet is receiving the intended care, and withhold
distributions to the caretaker/beneficiary if the pet is not
receiving the intended care. If your state statute does not
limit the trust terms, the client can include anything that
is not illegal or against public policy.
Here are several issues for client consideration:
- Creating a pet panel to offer guidance to the
trustee and caregiver/beneficiary, and to remove and
replace the trustee and caregiver/beneficiary, if
necessary. Consider including a veterinarian to make the
final decision regarding euthanization for medical
reasons, to ensure that the pet is not euthanized
prematurely by the caregiver/beneficiary.
- Paying the caregiver/beneficiary a monthly fee for
caring for the pet or allowing the caregiver/beneficiary
to live in the client's home, rent free.
- Awarding a bonus to the caregiver/beneficiary at the
end of the pet's life as a "thank you" for taking care
of the pet.
- Determining how the trustee is to distribute the
remaining trust funds after the last pet dies.
If the client
chooses not to create a pet panel to determine who will be a
successor caregiver/beneficiary, the trust should name
multiple successor caregivers/beneficiaries (three or more)
in case a caregiver/beneficiary is unwilling or unable to
serve. As a final back-up, the client should consider
requiring the trustee to give the pet to a no-kill animal
sanctuary if there are no caregivers/beneficiaries
available. This can literally save the pet's life.
Pet Identification
To prevent the caregiver/beneficiary from replacing a pet
that dies to continue receiving trust benefits, the pet
owner should specify how the trustee can identify the pet.
The client should consider micro-chipping the pet or having
DNA samples preserved for verification.
Other
You may encounter pet owners who want their healthy pets
euthanized when they become incapacitated or die, thinking
"no one can care for my pets as well as I do." However, many
states' courts have invalidated such euthanasia provisions
on the basis that destruction of estate property is against
public policy. In these states, encourage clients to
consider using no-kill organizations that have the pet's
best interest in mind and will find the next best home for
their pets. Again, this is a state-specific question and
thus it is critical that advisors know their state's laws in
this area.
Conclusion
Many clients are oblivious to the issues surrounding the
care of their pets after their disability or death. By
raising this issue with clients, the planning team can
differentiate itself and provide value in an area that is
significant to many clients, while also creating additional
revenue for multiple team members.
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