Future returns: why Fido needs a trust

When it comes to estate planning, pets should also be considered.

Many affluent pet owners have left millions of dollars for their cats, dogs and even chickens, perhaps most notoriously Leona Helmsley, who left $12 million when she died in 2007 to her white Maltese dog Trouble.

But since pets are considered property, individuals cannot bequeath money directly to their dog or cat. Instead, they should make arrangements to care for their beloved animals in the event of incapacity or death, according to Annamaria Vitelli, head of PNC Private Bank Hawthorn.

“Pet trusts are often seen as something rich and eccentric people would do,” Vitelli says. “But now it’s becoming mainstream.”

The reason? Nearly 70% of households in the United States own a pet, she says, so “70% of households have to think about it.”

Additionally, as of 2016, all 50 states and Washington, DC, created legal provisions for pet trusts, Vitelli says.

At Hawthorn, companion animals are often brought up in wealth planning as advisors get to know and understand the families they work with and recognize the value they place in their creatures. Because the bank has worked more with families in Texas, it’s also having conversations with ranchers about what will happen to horses that aren’t part of a working farm, but are pets, Vitelli says. .

penta recently spoke with Vitelli about what pet owners need to consider when caring for their non-human loved ones.

Caregiver selection

Whatever plan a family creates for their pet’s future, the primary consideration is appointing a reliable caregiver, Vitelli says.

Many pet owners have trusted family members and friends who already lend a hand in caring for their pets. Those who don’t have this type of social network should seek out animal care organizations or animal shelters that can support a pet with money set aside by the pet owner. the animal.

Vitelli recalls a client who had a parrot and worried about who would care for her bird when it died, as some parrots can live to be 100 years old. “The parrot went to a bird sanctuary with his allowance and was treated at the sanctuary,” Vitelli says.

It is also important that pet owners inform their designated caregiver of their intentions and understand what is involved. “You may have the perfect person in mind, but you shouldn’t blame them when reading the will — start talking to them now,” she says.

Some potential caregivers may simply not want to, or they may be prevented from taking on a pet for some reason. Also, because a caregiver’s situation can change, no longer allowing them to care for a pet, it’s important to name a successor who can step in, Vitelli says.

Choosing a Pet Trust

Once a caregiver is selected, pet owners can simply set up an informal arrangement with them that includes funds bequeathed in their will to cover costs. But there is no way to legally guarantee that funds so designated are used to care for a pet. This may not be a problem for those who can rely on trustworthy family members or friends. But for those who have doubts or do not have the ideal person to rely on, it is better to create a more formal structure.

“Even though we love our pets, the law does not recognize pets as people. They are property, so once you give that property, how it is treated by the person taking it is not something you can enforce,” Vitelli says.

Creating a pet trust can create this insurance. The simplest is a traditional trust, which would be governed by general trust law. In this case, the owner of an animal must name a beneficiary (the caregiver) and must fund the trust with enough money to care for the animal. A trust also requires a trustee, most likely another person who can ensure that any funds distributed by the trust are spent in accordance with the animal owner’s wishes and that the animal is healthy and safe.

“As long as the trust complies with the law of the state in which it is created and state law enforces conditional distributions from a trust, custody of your pet can be enforced in court” , according to a note to client from PNC Private Bank.

Matter of state laws

Another option is a statutory trust, which would be governed by the law of each specific state. As with a traditional vehicle, a statutory trust is enforceable, although it must comply with state law. Since these laws can be very different from state to state, it is important to work with an attorney who knows the law and can draft a trust.

Pennsylvania, for example, requires a trust to end when the last animal covered by the contract dies, while other states may limit the duration of the trust to a maximum of 21 years. Although this is the lifespan of most pets, many animals can live longer.

PNC advises its clients to put a reasonable amount of money in a trust to cover a pet’s lifetime needs and to make a plan for unused funds to be returned to their estate. But how much is reasonable? This can be difficult for some families to decide, especially when they don’t have children and pets replace two-legged family members. “It sometimes has more to do with how affectionate that pet is for that family member,” Vitelli says.

Additionally, some states limit the amount of money a pet can receive and, as is the case in Florida, penalize “overfunding.” In the year after Helmsley’s death, for example, a Manhattan surrogate court judge cut his dog Trouble’s inheritance from $12 million to $2 million, awarded $6 million to two destitute grandchildren and had the remainder donated to the Helmsley Charitable Fund. .

“You just want to make sure you’re not going against a judge’s sensibilities and state rules,” Vitelli says.

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