If Your Pet Is A Member Of The Family, Treat It Like One

August 31, 2012 — Leave a comment

Owning a dog — any dog — is a substantial investment of time and money. That’s especially true for owners who enter their pooches at The Westminster Kennel Club Dog Show in New York, where the best-in-show dog is chosen every year to sell out fanatical crowds.

Whether your pet is a rescue you adopted for nothing or a purebred with a street value of many thousands, you can’t put a price tag on what it’s worth to you. So you ought to take steps to provide for this family member after you are gone just as you would for any other. There are a couple of ways to do this, which can be used alone or in combination with each other.

Set up a trust. The tobacco heiress Doris Duke, who died in 1993, included a paragraph in her will with detailed instructions about who should become the owner of whatever dog lived at her Beverly Hills home when she died (her first choice was the caretaker of the house). Duke also created a $100,000 trust to cover her pet’s food, medical bills and other expenses.

More famously, Leona Helmsley set up a $12 million trust to benefit her dog, Trouble. After Helmsley died in 2007, two of her grandchildren, whom she had disinherited, challenged the arrangement. They persuaded the court to reduce the trust to $2 million and walked away with $3 million apiece. The other $4 million went to a charitable trust that Helmsley and her husband Harry had set up. (Trouble died last year.)

Such trusts (funded with much smaller sums) have become increasingly popular, and can be done in all states, says Gerry W. Beyer, a professor at Texas Tech University School of Law.

Creating and administering pet trusts involves many of the same issues that arise with other types of trusts, including how to fund the trust, whether it should take effect while you are still alive (for example, if you are no longer able to care for your pet) and whom to choose as trustee. You will also want to identify the caregiver (include alternates in case the person you have in mind cannot do it), ideally someone other than the trustee. Include care instructions, and indicate what should happen to the funds after your pet dies.

Choose a pet guardian. A simpler approach is to designate in your will the person to care for your pet, and leave that individual enough money to carry out the responsibility. This raises two potential pitfalls: the amount could be subject to estate tax and there’s no legal mechanism for making sure things go as you planned. Nor is there any guarantee that the person will want your pet or be able to care for it when time comes.

In response to this problem, a growing number of for-profit and not-for-profit pet guardian programs have sprung up around the country.

Pet guardian programs are terrific for people who don’t have a specific person in mind or need to name an alternate on their pet trust if the caregivers they have listed are unable or unwilling to serve. Or, you can combine the two concepts, and put the animal care organization in charge of your pet’s care, while naming the trustee to oversee it and control the money.

Guardian programs are also great if you have a pet like a bird or a tortoise that has long life expectancy–longer than any human beings whom you trust, Beyer says. These programs might also be well suited to finding a home for exotic pets like pigs and llamas.

In choosing a facility, here are issues to consider:

What’s the rep? Visit the facility, just as you would if you were putting a relative in a nursing home. Ask the local humane society about the organization’s reputation.  Check for complaints on the Internet and through the local Better Business Bureau.

What will it cost? Some programs require you to create a mini endowment, either during your life or through your estate plan. Programs that are set up to take animals from around the country tend to charge more.

What are the screening criteria? Your pet may have a special place in your heart, but if he is a furniture scratcher, or sometimes has an accident in the house, that could work against him in finding a new home.

Is it a fit for your pet? When you pass away, you’ve turned over responsibility for your pet. You want to make sure that the organization’s mission fits with what your animal needs.

What’s the track record? Your goal here is to find out what percentage of animals are placed into a new home and what happens to those that aren’t. (Chances are they will be euthanized.) Loewe recommends you ask not only, “What is your save rate?”(the number of animals that go from intake to adoption) but also “What is your save rate philosophy?” The answers will give you some idea of why an animal might not be adoptable at that shelter — for example, because of a medical or behavioral issue.

One final piece of advice: In addition to expressing your wishes in estate planning documents, communicate them to friends, family and financial advisors. Otherwise, by the time they locate the relevant documents, it may already be too late to save Fluffy or Rover.

JDKatz, P.C. is a full-service law firm focused on tax law and estate planning. We are dedicated to minimizing your existing liability and risks while providing valuable tax planning to streamline your tax issues in the future. Please call us at 301-913-2948 to schedule an appointment to meet with one of our trusted attorneys.

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