Pet Trust Laws 101:
What is a Pet Trust and Why
Should We Care?
By: Karla Schreiber, J.D. (copyright 2004)
This article does not constitute legal advice and is intended only to
provide a general overview of the topics discussed.
If you are considering creating a pet trust, please consult your local
estate and trust attorney and CPA. Pet
trust laws vary from State to State, and not all States have enacted pet trust
Illinois (the State I call home) joined the ranks of twenty-four other States[i]
by enacting a Pet Trust Law, which
will become effective January 1, 2005[ii].
What is a “pet trust” and how might it be used by owners and
breeders? The following is a brief
overview of pet trusts and their potential uses.
pet trust is a legal arrangement that allows owners to establish trust accounts,
upon their death, for the ongoing care and maintenance of their domestic or
companion animals. Special “pet
trust” laws are required because a traditional legal trust can only be
established for a period of time measured by a human life.
Over the years, many State courts ruled that the life of a domestic or
companion animal could not be used to sustain a legal trust agreement. Prior to the enactment of pet trust laws, the only way for a
pet owner to try to ensure a pet’s well being after the owner’s death was to
make conditional gift (in their will) of funds to a friend or family member for
the pets’ care and maintenance. Conditional gifts are difficult to enforce,
since there is no trustee or overseer to ensure that the funds given to the
caretaker are actually used for the benefit of the pet.
pet trust can be funded by existing estate assets, or through other mechanisms,
such as a whole or term life insurance policy.
One downside to trusts is that they can be expensive to establish and
maintain. A good estate and trust
attorney can provide an estimate of administrative costs associated with a pet
trust – as well as the amount of money that should be used to fund the trust.
The latter amount will vary depending upon the number and of type of pets
involved. For example, horses live
far longer than most dogs or cats. A
pet trust to maintain a horse would incur far greater administrative fees over
time, and require far more principal (the amount necessary to maintain the
animal over its estimated life span following the owner’s death).
A pet trust for a giant sea turtle?
We won’t even go there!
trusts can and should (like any trust) be very specific.
The maker of the trust may specify a trustee and a successor trustee, and
the trustee should be someone other than the individual who will be the pets’
caretaker. The caretaker can be an
individual, or a corporation, but most owners select a friend or relative or
other individual who knows the pets and is able/willing to care for them.
Secondary and tertiary caretakers may be named as well, in case the
owner’s first choice becomes disabled or dies and is no longer able to care
for the pets. The trust may also,
among other things, specifically identify each pet via a tattoo, microchip, or
other permanent form of identification, provide a detailed description of how
the pets should be maintained, name one or more vets authorized to care for the
pets, state how the trustee will reimburse the caretaker for the pets’
expenses, and indicate how often the trustee should physically visit the
caretakers and pets to ensure that the grantor’s wishes are respected.
The trust must also name a “remainder beneficiary” – an individual
or organization that will receive any funds left in the trust account after the
death of the last pet named in the trust.
Many pet trust laws, including the new Illinois Pet Trust Law, contain a
provision that expressly allows a court to reduce the amount of property
transferred into the pet trust at the owner’s death if the court determines
the amount is substantially more than that required to care for the pets covered
by the trust. It is also possible that if the trust is over-funded,
relatives of the owner may challenge the trust.
The amount used to fund the trust must be reasonably related to the
actual needs of the pets, and those needs must be specifically detailed in the
State enacted pet trust laws make trusts for companion/domestic animals
enforceable under State law, at this time the trusts are still considered
invalid for federal tax purposes. For
this reason, the federal tax consequences of setting up a pet trust should be
reviewed carefully by both an estate and trust attorney and a CPA familiar with
estate and trust tax issue. Rep.
Earl Blaumenauer (D-Oregon) has introduced federal legislation (H.R. 1796) that
would authorize trusts for pets under federal law, if they are established as
charitable trusts (when the last pet covered by the trust document dies, the
remaining funds are transferred to a charitable organization as defined by
current Internal Revenue Service guidelines).
This legislation was introduced in May, 2001, and remains pending.
the average pet owner, with just one or two dogs or cats, and family members
willing and able to look after the pets in the event of the owner’s death,
establishing a pet trust may not be necessary.
The owner may feel comfortable that existing family members will continue
to care for the pet and see no benefit to jumping through the legal hoops
required to establish a pet trust. However,
for owners with multiple dogs - for
example, individuals who show and breed purebred dogs – pet trusts could
provide considerable peace of mind. In
many cases, the family and friends of owner/breeders are unable or unwilling to
care for all of the owner/breeder’s animals.
A pet trust potentially allows the owner/breeder to avoid this burden to
family and friends. An
owner/breeder can create a pet trust specifying that that certain dogs, or
specific numbers of dogs owned by them at their death, be entrusted to separate
caretakers designated in the trust document.
All of the designated caretakers will receive trust funds for the
maintenance of the dogs in their care, and the trustee will oversee the trust
administration to make sure that all of the original owner/breeder’s wishes
are carried out.
For breeder/owners, another important potential benefit of pet trusts is that these trusts may facilitate the continuation of the breeder’s program after their death. A breeder could designate fellow breeders to serve as caretakers of their dogs, and specifically authorize the ongoing use of those dogs in the caretakers’ breeding programs (AKC ownership issues permitting). Money from the pet trust typically can be used only for the care and maintenance of dogs owned by the breeder at the time of their death (and not subsequent offspring of those animals)[iii]. However, funding from the pet trust could greatly ease the burden of the new caretaker/breeders in caring for and maintaining additional dogs. In this regard, pet trusts potentially are a mechanism for ensuring that important breeding programs (and the important genetic contribution of the dogs in those breeding programs) do not “die with the breeder” – but will continue to live on and contribute to the welfare of the breed as a whole.
following States have enacted pet trust legislation (as of the date this
article was written): Alaska,
Arizona, California, Colorado, District of Columbia, Florida, Illinois,
Iowa, Kansas, Maine, Michigan, Missouri, Montana, Nebraska, Nevada, New
Jersey, New Mexico, New York, North Carolina, Oregon, Tennessee, Utah,
Washington, Wisconsin, Wyoming. The
text of these laws may be viewed at: http://www.professorbeyer.com/Articles/Animal_Statutes.htm
760 ILCS 5/15.2. The
text of the Illinois Pet Trust Law http://www.professorbeyer.com/Articles/Animal_Statutes/Illinois.htm
[iii] Colorado’s pet trusts law extends trust coverage to the offspring of a domestic or companion animal “in gestation” at the time of the owner’s death. Colo. Rev. Stat. § 15-11-901 (2002). To the best of the author’s knowledge, Colorado is the only State that has adopted this provision.