Humans are not the only Americans enjoying longer lifespans than a century ago.
Thanks to progress in nutritional science and veterinary care, many of our four-legged and feathered friends are remaining strong, active and alert well into and even beyond the traditional “golden years” of their species. As a result, it’s more important than ever for pet owners to make arrangements for the continuing care of their beloved companions no matter what circumstances may arise. Pets that outlive their owners’ ability to care for them should never be left out in the cold.
An Informal Agreement for Care Is Not Enough.
Most pet owners have a trusted friend or relative who looks after Fido, Whiskers or Polly when the pet owner is unable to do so due to travel or illness. In many cases, the two parties have even discussed the possibility of the friend or relative assuming responsibility for the animal’s care after the owner is gone. Unfortunately, such informal agreements, even if committed to paper, don’t have the force of law behind them. If that friend’s or relative’s circumstances change one day, making it more difficult for either to care for a pet in the owner’s absence, the pet could end up at a shelter, lost or abandoned.
Can You Provide for the Care of Pets in Your Will?
The answer is yes, and the technical term for this approach is a “statutory trust.” However, even though wills are legally enforceable documents, using one as the vehicle to ensure a pet’s future care has many drawbacks.
First, a will only fully takes effect once it has passed through the process of review—and potential alteration—known as probate. Probate takes months to complete, and in the meantime, the pet will be in limbo. Most animals have less sophisticated, more specialized emotional mechanisms than humans, making them less able to adapt to changing circumstances. The trauma of an extended period of uncertainty about where home is and who will look after them can leave a pet emotionally shaken for years.
Second, a statutory trust only takes effect on the pet owner’s death, so it will not protect a pet in the event the owner becomes incapacitated. Third, and perhaps most importantly, a statutory trust ultimately only allows pet owners to specify who will assume care of their pets and to leave that person a lump sum of money to cover associated costs. There is no way to offer legally enforceable instructions regarding how a pet should be fed, exercised or cared for in the event of a sickness or injury.
Peace of Mind
A pet trust is a stand-alone, legally binding document and financial arrangement that removes any uncertainty about the pet’s future. Pet trusts take effect immediately on the pet owner’s death or incapacity, without the need for review by a judge.
In addition to providing a mechanism through which a pet’s future guardian will receive necessary funds, on an ongoing basis rather than as a lump sum, pet trust documents afford owners the opportunity to specify exactly how their faithful companions will be cared for, down to the smallest detail. From Fido’s park trips to play fetch, to Whiskers’ favorite organic cat food, to Polly’s voice lessons, owners can preserve their pets’ familiar routines to help them through the difficult adjustment to life with a new caregiver. Owners can even provide end-of-life directives to ensure that a pet spends his or her last months and weeks in comfort.
The duration for which a pet trust remains in force varies from state to state, but in most situations, the arrangement will stay in effect until the animal passes away. Make sure the trust is set up with clear instructions for the distribution of any funds remaining in the trust at that time. Some pet owners leave remaining funds to their pet’s caregiver, while others use the opportunity to make a generous donation to the ASPCA, a local shelter or another animal protection organization.
Setting Up a Legally Binding Pet Trust
Setting up a traditionally structured trust for any purpose, including for the future care of a pet, usually requires assistance from an attorney and a financial advisor. With a traditional trust structure, an owner will appoint not only his pet’s future caregiver (who must be a signee of all documents establishing the trust), but also one or more trustees or investment trustees and/or a trust manager. In theory, the caregiver and the trustee or manager could be the same person, but segregation of responsibilities is advisable. Caring for a pet is, and should be, emotional. Trustees and trust managers are one step removed from that emotion; therefore, they are well positioned to provide objective oversight and ensure that every care instruction is carried out to the letter.
As an alternative to setting up a full-fledged traditional pet trust, there are online legal services that offer simplified fill-in-the-blank animal care trust agreements. The documents are legally binding, but they don’t allow for the appointment of a trustee or manager and so don’t offer the guarantee of objective oversight that traditionally structured trusts provide.
Remember, in the eyes of state governments, your pet is property, legally no different from your house or car. You certainly don’t view your pet that way, nor should you. Yet the way states view the matter is an important reminder that diligent, thorough estate planning should include making certain that the companion who has added so much to your life will live in comfort for the rest of theirs.
This article is not tax, legal, or other professional advice and cannot be relied upon for any purpose without consultation and advice from a retained professional.
Harvey Bezozi is a CPA and CFP. More information can be found at YourFinancialWizard.com.