Statistically, U.S. birth and marriage rates are on the decline, while pet adoptions are on the rise. Pet lovers, especially millennials, are known to treat and view their “fur babies” as children, developing deep, loving bonds. It’s devastating to think about a pet becoming ill and needing care, but what about an owner becoming ill, incapacitated or dying – in absence of surviving immediate family, who will care for your pet? Find peace of mind regarding your pet’s care and ongoing well-being using common estate planning documents.
Pet Estate Planning: Trusts
Five years ago, fashion icon Karl Lagerfeld passed away, leaving behind his beloved cat Choupette. To help provide care and a continued lavish lifestyle for his feline friend, he created a Pet Trust – and funded it with nearly $200 million in assets. This estate planning strategy was used in Germany and can also be used in many U.S. states, including Pennsylvania and New Jersey, but is this the best way to protect a pet?
Common challenges of creating a Pet Trust include:
- Administrative burden – Trusts are often complex and need to identify trustees who must handle a myriad of filing and investing responsibilities, notably annual tax returns and distribution of funds upon the animal’s death to the remainder beneficiaries.
- Administrative fees – fees encountered during administration may not make a modest Pet Trust cost-effective (not all of us can be Karl!).
- Taxes – a Pet Trust is not charitable in nature and is subject to both income and inheritance taxes (the highest inheritance rate is assessed by both PA and NJ).
Wealthy individuals may find comfort in a Pet Trust, but average individuals should consider a more cost-effective (and just as effective) option.
Covering your pet in your Will
While most people consider their pets family members
, in the eyes of the law, pets are considered property. Addressing your pet’s care in your Will is a prudent way to ensure they have what they need when you are gone.
Your Will should address the following when it comes to pet estate planning:
- Caretaker – similar to a guardianship for minor children, you want to consider who will care for your pet. Would this person want your pet and provide the level of love and care you wish for and expect? Consider naming a responsible person as a caretaker, and make sure they are willing and able to act.
- Provision of funds – pets cannot inherit money or property, so ensure your pet’s caretaker receives the money needed to pay for expected medical needs, annual veterinary visits, food and more. A recent study showed annual costs of dog ownership can vary, from $1,270 to $2,803; money can be stewarded to cover these expenses by naming your caretaker as a beneficiary.
- Wishes – while not a legally binding document, a letter of instruction can be prepared to let your caretaker know about your pet’s routine or favorite places to walk, or people you wish to have in the pet’s life like a dog sitter or family friend.
Honoring your pet and others
Perhaps you adopted your dog from a local shelter or received excellent medical care at your veterinarian during a health scare and you want to honor these organizations upon your death.
Use your estate plan – your Will, Trust or beneficiary designations – to bequeath funds to your chosen pet charities. Just like identifying the caretaker for your pet and designating funds for your pet’s care, you can designate a dollar amount or percentage of your estate for worthy charitable purposes. If done properly, a gift to a qualified charity will be exempt from estate and inheritance taxes.
An experienced estate planning attorney and/or financial advisor can determine if this option makes sense for you.
Peace of mind with pets
Providing for pets in one’s estate plan is a worthy goal. While you probably worry about your pet while you’re away at work, on vacation, and when your furry friend is not feeling well, you can find peace of mind knowing they’re protected and provided for. Use well-structured pet estate planning documents to ensure your beloved animal can have the love and care you desire for them, and a paws-itively comfortable life.
Reprinted with permission from the Spring 2024 Edition of Network Magazine © 2024 All rights reserved. Further duplication without permission is prohibited.
