A trust is a specific type of legal structure that allows a person to transfer property to another person. The trust creator (the “settlor”) chooses a person who will receive the property (called the “beneficiary”). Rather than transferring the property directly to them, the property is first transferred to another party, called the “trustee”.
The trustee will hold and manage the property until the proper time for the transfer to the beneficiary. Sometimes, the transfer may depend on certain conditions being met. For instance, it is common for property to be held in trust until the beneficiary turns a certain age, or when they finish college, or other conditions.
A pet trust is a trust created specifically for the continued care and maintenance of a particular animal or animals. The trust is usually funded by money or property from the settlor, and has a designated trustee assigned to administer the trust.
Historically, estate law has been reluctant to allow people to leave assets to their pets. Today, many states recognize pet trusts as another option that pet owners can ensure their pets receive care when they have passed.
What are Some Common Issues with Pet Trusts?
When drafting the terms of a pet trust, there may be many potential obstacles in your path towards the fulfillment of the trust’s terms. These can include:
- Different States Have Different Laws and Regulations Regarding Pet Trusts: The state where the trust is to be administered may not be the same one as in which it was drafted. Different states may not have laws recognizing the validity of pet trusts. Also, since this is a newer legal subject, the laws in this field are subject to rapid changes.
- Rule Against Perpetuities: With the rule against perpetuities, pet trusts in some states may only be valid for a limited number of years. This is usually around twenty-one years, which may be insufficient for some animals, such as a tortoise or horse.
- The Mental Capacity of the Trust Drafter May Be Questioned or Challenged: The choices and directions of some pet owners may seem outrageous to outsiders, raising questions of mental capacity. Especially if the trust has more than enough assets to care for the pet, or if the trust stipulates that the pet live in a certain level of “luxury.”
- Selection of Trustee: There may be some disputes or disagreements with regard to the selection of the trustee. Pet trusts are unique in that the trustee must sometimes have special knowledge with regard to the pet, especially if it is a rare or unique pet. A trustee can sometimes be removed if they prove to be inadequate for their role.
How are Pet Trusts Affected by Taxes?
For pet trust arrangements, the Internal Revenues Service (IRS) generally cannot tax the pet or the trustee. The IRS does stipulate that in states where pet trusts are legally recognized, the trust can be taxed at a rate that is much lower than that of the average trust.
Again, these types of details may be subject to change since this is a relatively newer field of law. The number of pet owners are rising, which means that the law will need to reflect their growing concern for their pet’s care after they pass away. As more states begin implementing pet trust laws, the laws may change and evolve to meet the needs and demands of pet owners.
Are There Any Alternatives to Pet Trusts?
While options for the care of pets after the owner’s death may be limited, there may be some alternatives besides pet trusts.
For instance, instead of a trust, a conditional gift could be made to a person with the condition or requirement that the money is used for the care and maintenance of a pet or animal. However, conditional gifts may not always be favored in all states. Thus, a court might then declare the gift invalid, or it might void it. In such cases, the gift might be invalidated altogether.
In some states, a pet trust may also be created using less formal methods. For instance, they can be created by giving the animal to a person, along with money to care for the animal. But again, not all states will recognize this as a pet trust. In this case, the recipient may be taxed on the animal’s value along with the money set aside for its care.
Again, one of the main concepts to remember with pets is that the trust is not for the benefit of the pet. That is, the pet cannot be the beneficiary or the receiver of gifts or property directly from the trust. Instead, the pet trusts exists so that a trustee can manage the funds that are intended for the care of an animal. So, a person would probably never be able to leave their home to a pet; however, a court might allow a pet trust to be created for the care of the pet in the future.
Should I Consult an Attorney for Help with Estate Planning Involving Pets?
Pet trusts are a novel idea in many state laws and can be confusing when different states impose different laws. An experienced estate planning attorney can help make sure that your pet trust is valid and enforceable in the area where you live. A wills, trusts, and estates attorney can also help you draft the pet trust and can ensure it follows all state requirements.