We love our pets. Nearly two-thirds of all Americans have a pet, and among those who do, nearly 70% have a dog; 50% have a cat; 11% have fish; 8% have birds; and 7% have horses, rodents or reptiles. Nearly 90% of all pet owners consider their pets to be part of their family, and in some cases, their pets are their only family. Many pet owners, however, are unaware or uninformed as to what might happen to their pets should they die or become incapacitated. Traditionally, a legal obstacle to leaving money to care for pets, both during life and after death, was common law. Pets had been treated historically as personal property and therefore could not own property in their name – nor could they be beneficiaries of a trust. That began to change in 1990 when the Uniform Probate Code was amended to recognize the creation of Pet Trusts, and states began to enact pet trust laws that govern in the event of an owner’s death or disability.
The Naples Daily News recently published an article, “Pet Trusts Gaining Popularity.” The article describes how the state of Florida enacted laws that authorized the establishment of pet trusts in 2003. These rules allow for people to provide for the care and maintenance for the lifetime of their pets.
Now almost every state recognizes these trusts (which vary in each state). A named trustee will typically be responsible for the investment, management and distribution of the trust assets. Another individual is named to avoid conflict of interest as the pet’s caregiver. The trust will include details for caregivers, medical needs, and the final arrangements for the pet’s death.
However, Internal Revenue Code typically doesn’t recognize pet trusts, as an animal isn’t a “person” by definition. The trust wouldn’t work because it doesn’t have a legal “beneficiary.” Nonetheless, the IRS does recognize pet trusts for tax purposes.
If the trust is validly established under state law, the assets passed to a pet trust are included in the decedent’s gross taxable estate. But no part of the assets qualifies for a charitable deduction—even if the remainder beneficiary after the passing of the pet is a qualifying charity.
You should speak with a qualified estate planning attorney because estate taxes and other expenses attributable to the trust will need to be considered when drafting a pet trust. Planning for your pets can be an important part of your estate planning process.
Reference: Naples Daily News (August 17, 2015) “Pet Trusts Gaining Popularity”
Make sure that all members of your family—including your pets—are cared for in your estate plan, contact us at www.ssslegalconsultancy.com.
Published on: 09-Sep 3, 2015