Pet Trusts: Only for the Rich and Famous?
How much do we love our pets. Let us count the ways....
For those who need to consider possible options for the planning process for our canines, felines, birds of a feather and beyond - this article is very informative and educational.
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Pet Trusts: Only for the Rich and Famous?
By Ronald A. Fatoullah, Esq., Elizabeth Forspan, Esq. and Aaron Moss
Pets are universally beloved. As of 2012, The Humane Society estimated that 62% of American households included at least one pet. Many people have come to view their pets as much more than animals to care for; rather, they become members of the family. In 2007, billionaire Leona Helmsley made news one final time by leaving $12 million to her dog, Trouble. More recently, comedian Joan Rivers reportedly made provisions to ensure that her dogs would be taken care of after her death. While Leona Helmsley and Joan Rivers clearly loved their pets and did all they could to guarantee they would be provided for after their deaths, the question remains: are these opportunities only available to the extremely wealthy and to Hollywood stars? Or can the other 61.9% of Americans pet owners also take steps to plan for their pets’ futures?
Thankfully, due to the creation of pet trusts, the ability to care for one’s pet after death has now become a viable option to the “ordinary” pet owner.
In general, one cannot leave property directly to his or her pets. This is due to the fact that courts look at pets as property, and it is impossible to leave property to property. In an attempt to get around this obstacle, some pet owners have tried to place the funds in a trust and name their pet as the beneficiary. However, historically, common law has refused to recognize a pet as a beneficiary. Things began to change when, in 1990, a provision was added to the Uniform Probate Code that allowed for the creation of pet trusts.
When creating a pet trust, the “settlor” (i.e. the pet owner or grantor of the trust) funds the trust with both the actual pet and some additional assets. The person in charge of the funds, the “trustee,” then has a legal obligation to deliver the funds and the pet to the settlor’s designated caregiver (also known as the “beneficiary”). The caregiver must also use the funds solely for the benefit of the pet.
Currently, there are two main types of pet trusts: traditional and statutory. In a traditional pet trust, the pet owner has the ability to create a full-fledged trust. A traditional pet trust should be drafted by a lawyer. With this type of trust, the owner can dictate all of the specifics relating to the care of their pet, including, but not limited to, who the caregiver will be , what expenses are covered, and what should happen to their pet and other trust assets after the pet’s death.
In at least 47 states, there is also the option of establishing a statutory pet trust. New York is one of these states and its statutory pet trust is codified in EPTL §7-8.1. In a statutory pet trust, the owner of the pet simply states in his/her will that he is leaving money in a trust for his pet. This creates a very simple trust that does not include any direction as to how the money should be spent. Rather, state law fills in the gaps and the provision is considered effective. The benefit of a statutory trust is that it is relatively inexpensive. As mentioned above, merely mentioning a pet in a will is not enough to ensure they will receive the funds. A pet owner must, at a minimum, state in their will that they are leaving money in trust for their pet.
When to Fund a Pet Trust
Funding of the pet trust will vary depending on whether the pet owner creates a traditional or a statutory pet trust. In a traditional pet trust, the settlor must fund the trust upon creation. In contrast, the very nature of a statutory pet trust dictates that it will only come into existence after a person has passed away. As such, a statutory pet trust is funded with assets from the estate. Thus, as opposed to a traditional pet trust, a statutory pet trust has the benefit of not having to be funded immediately. However, one disadvantage to establishing a statutory pet trust is that it must go through probate. This can create a problem: the pet must be cared for in the time period after the pet owner’s death but before the will is proven to be valid before the Surrogate’s Court, and funds might not be available in the interim. In addition, a statutory pet trust does not provide for alternatives in case a pet owner remains alive, but is incapacitated or otherwise unable to continue to care for their pet. Because of these concerns, an owner might choose to establish a traditional pet trust.
The world of pet trust law has rapidly progressed over the last quarter century. Previously, pet owners would pass away without knowing whether the instructions for the care of their pets would be duly carried out. This undoubtedly created anxiety. Things have changed significantly. Today, pet owners, from the rich and famous to the average American worker, can now be confident that legal avenues exist to ensure that their beloved pets will be cared for after they are no longer able to do so.
Ronald A. Fatoullah, Esq. is the principal of Ronald Fatoullah & Associates, a law firm that concentrates in elder law, estate planning, Medicaid planning, guardianships, estate administration, trusts, wills, and real estate. Elizabeth Forspan, Esq. is the managing attorney of the firm. Aaron Moss, a summer associate with the firm, attends the University of Maryland School of Law, where he is an Associate Editor of the Maryland Law Review. The law firm can be reached at 718-261-1700, 516-466-4422, or toll free at 1-877-ELDER-LAW or 1-877-ESTATES. Mr. Fatoullah is also the co-founder of JR Wealth Advisors, LLC. The wealth management firm can be reached at 516-466-3300 or 800-353-3775.