Saturday, November 14, 2009

Frequently Asked Questions About Including Provisions For Pets In Trusts

Over two-thirds of pet owners treat pets as members of their families while 12% to 27% of pet owners include their pets in their wills and/or trusts. Many pet owners want to make sure that even if they can't take care of their pets due to death or disability, those animals will be provided for and well cared looked after.

Sometimes people make informal arrangements with a relative or friend to care for their pets. Sometimes this can work out but things can go wrong. What if the new owner doesn't have the money to provide care for your pet? What if a there's a dispute as to who should get the pet? What if something happens to the new owner? What if the new owner's pet and your pet don't get along?

If you don't have a will or trust, your pet will go to your next of kin as determined by state law. Many pets end up in shelters if the next of kin is unable or unwilling to care for the pet.

To avoid problems and be assured that your pet will be cared for after you die or are disabled, consider making more formal provisions for your pet's care. Remember: you can't leave money in your will to your pet. The law treats pets as property and you can't leave property to other property (your pet).

However, one thing you can do to make sure your pet will always be well provided for is to make your decision legally binding by including it in your revocable living trust and pourover will. The laws of the state of California allow for trusts for the care of pets or domestic animals for the life of the animal. In California, this is governed by California Probate Code Section 15212.

For those who reside outside California, a summary of pet trusts state by state is on the Humane Society website at: http://www.americanhumane.org/assets/docs/protecting-animals/PA-laws-pet-trusts.pdf

In a prior posting, I discussed the amendment in July 2008 of California's permissive pet trust statute to make it a more modern statute with enforceable provisions in post entitled "Protecting Your Pets in California":

Making provision for your pets in your will and trust is becoming more common. Some people have bought "pet trusts" online while neglecting to take care of their own estate planning. In estate planning for our clients, it is relatively simple to make a provision for your pets. Here are some frequently asked questions and things to think about when you want to make a provision for your pet in your trust and pourover will:

1. Do you to want to be sure your pet receives proper care after you die or in the event of your disability?

If so, as part of your trust you will want to give enough money or other property to a trusted person or bank (the “trustee”) who is under a duty to make arrangements for the proper care of your pet according to your instructions. The trustee will deliver the pet to your designated caregiver (the “beneficiary”) and then use the property you transferred to the trust to pay for your pet’s expenses.

2. How do I decide on the individual to name as the beneficiary (my pet’s caregiver)?

Selecting the caregiver is obviously important. You should name at least one, preferably two or three, alternate caregivers in case your first choice is unable or unwilling to serve as your pet’s caregiver. In addition, to avoid having your pet end up without a home, consider naming a sanctuary or no-kill shelter as your last choice. Here are some things to consider in making the decision on who to name as caregivers:

· Is he or she willing to assume the responsibilities associated with caring for your pet?

· Is he or she able to provide a stable home for your pet?

· How will his or her family members (including pets) get along with your pet?

3. What type of instructions can you leave in the trust provisions relating to your pet?

You can have significant control over your pet’s care after you pass or are disabled. For example, you can specify who manages the property (the trustee), the pet’s caregiver (the beneficiary), what type of expenses relating to the pet the trustee will pay, the type of care the animal will receive, what happens if the beneficiary can no longer care for the animal, and the disposition of the pet after the pet dies.

Before you create the provision for your pet, think about specific instructions you may want to specify for the pet's caregiver (beneficiary):

· What are the pet's food and diet; daily routines; grooming; toys; exercise and socialization needs?

· What are the pet's medical needs? Who is the preferred veterinarian and boarding place?

· What amount of compensation, if any, do you want to pay the caregiver? Will the caregiver agree to care for your pet without compensation?

· How do you want the caregiver to document pet expenditures for reimbursement?

· Do you want the trust to pay for liability insurance in case the animal bites or otherwise injures someone?

· How do you want the trustee to monitor caregiver’s services?

· How can the trustee identify the animal (I have seen one case where a replacement animal was obtained so the caregiver/beneficiary continued to receive compensation from the trust)

· How do you want the disposition of your pet’s remains, such as burial, cremation, memorial, and so on, to be handled?

4. What is the advantage of an inter vivos or living trust in terms of taking care of my pet?

An inter vivos trust takes effect immediately and thus will be functioning when you die or become disabled. This avoids delay between your death and the property being available for the pet’s care. An inter vivos trust, however, has start-up costs and administration fees.

A testamentary trust, in contrast, is less expensive in some ways because the trust does not take effect until you die and your will is declared valid by a court (“probating the will”). However, there may not be funds available to care for the pet during the gap between when you die and your will is probated. In addition, a testamentary trust does not protect your pet if you become disabled and unable to care for your pet.

5. How do I "fund" my pet trust?

First, what is "funding"? Funding means to transfer money or other property into your trust for the care of your pet. Without funding, the trustee will not be able to provide your pet with care if you become disabled and after you die.

You need to consider a number of facts in deciding how much money or other property to transfer to your pet trust. These facts include:

· The type of animal and its life expectancy (especially important in case of long-living animals such as parrots);

· The standard of living you wish to provide for your pet including providing for care when the caregiver is out-of-town;

· Any medical conditions, payment for vet insurance, and your desire to provide for future medical treatment;

· Whether the trustee is to be paid for his or her services;

· Adequate funds should also be included to provide the animal with proper care, including boarding for times the caregiver is on vacation or unable personally to provide for the animal.

· Consider the size of your estate and how you can fund the care of your pet. If your estate is sufficiently large, you could transfer sufficient property so the trustee could make payments primarily from the income and use the principal only for emergencies.

On the other hand, if your estate is small, you may wish to transfer a lesser amount and anticipate that the trustee will supplement trust income with principal invasions as necessary. Or you may consider funding with life insurance or direct transfers of property (such pay on death accounts of annuities, bank accounts, and retirement plans). Be sure to consult with your estate planning attorney about the correct way of naming the trustee of your pet trust as recipient of these funds.

· Consider whether transferring a large amount of money or other property to your pet trust will encourage your heirs and beneficiaries to contest the trust.

· Consider funding with life insurance. This policy may be one you take out just to fund your pet trust or you may have a certain portion of an existing policy payable to the portion of the trust for your pet. This technique is particularly useful if you do not have or anticipate having sufficient property to transfer for your pet’s care. Life insurance “creates” property when you die which you may then use to fund your pet trust. Be sure to consult with your estate planning lawyer about the correct way of naming the trustee of your pet trust as a beneficiary.

· Consider making the caregiver or trustee different than the “remainder beneficiary” (the person or entity who will receive any remaining trust property after your pet dies). By not making the caregiver the remainder beneficiary, the caregiver has more of an an incentive to keep your pet alive.

· Consider what would happens if the trust runs out of property before your pet dies. If no property remains in the trust, the trustee will not be able to pay for your pet’s care. Perhaps the caregiver will agree to continue to care for your pet with his or her own funds. If the caregiver is unwilling or unable to do so, you should indicate in your pet trust the person or organization to whom you would like to donate your pet.

6. How do I provide for my pet in my estate plan?

Consult with an attorney who specializes in estate planning. If you want to ensure that your pets are properly cared for, you should address these issues sooner rather than later. It is common to put these type of projects off and we are skilled at helping our clients begin and go through the estate planning process including provisions for pets. By considering and answering the questions above, you will be well-prepared to work with an estate lawyer.

Posted by Henry (Hank) J. Moravec, III, a partner at Moravecs, A Professional Law Corporation. For a free 30 minute consultation (telephonic or in person), you can e-mail Hank Moravec at hm@moravecslaw.com or call him at (626) 793-3210.

Mr. Moravec is a very experienced Los Angeles estate planning attorney, Los Angeles trust attorney and Los Angeles probate attorney. He has more than 20 years' experience in estate planning and is extremely dedicated to his clients and helping them create a plan that is tailored to their wishes, finances, helps avoid probate and takes into account their families' unique situation.

The firm website is http://www.moravecslaw.com/. The firm is located at 2233 Huntington Drive #17, San Marino, CA 91108. There is ample free parking adjacent to the firm's office.
The firm is a boutique estates and trust law practice specializing only in Estate Planning, Probate, Trust Administration, Beneficiary and Trustee Representation, Tax Law, and Nonprofit Law.

The office is located in San Marino, California, a suburb of Los Angeles in the San Gabriel area located 20 minutes from downtown Los Angeles. The firm represents clients throughout California and its attorneys appears in probate court throughout Southern California.