Editor’s Note: “Companion animal” is the preferred term – just doesn’t make for a catchy title.

Although many states define companion animals as property most of us view them as family members. With the recent passing of legislation in Minnesota the creation of pet trusts is now possible in all 50 states. While the following is not exhaustive it touches on some of the important points. Remember to consult with your financial planner and estate attorney for additional detail.

There are two main ways to provide for the care of companion animals:

(1) Statutory Direction

  • a set of instructions triggered by a clause in a will
  • cannot be funded until person’s death

Pros:

  • cost-effective
  • easy to implement

Cons:

  • invalid during person’s life (since triggered by clause in decedent’s will)
  • wills distribute property but cannot provide directions on how to use funds or care for an animal
  • courts have an obligation to review wills and reserve right to revise (instructions can be disregarded)
  • court review can take time and, unlike tangible personal property, animals require immediate attention
  • funds are distributed in a lump sum
  • courts may appoint guardians if not identified in a will
  • if a guardian is identified s/he may be unaware of or accept his/her responsibilities
  • inconsistencies between states including trust expiration dates

(2) Stand-Alone Trust

  • created during person’s lifetime
  • requires an attorney, trustee and funds to be set aside

Pros:

  • valid in all 50 states and the District of Columbia when signed by creator of trust and named guardian
  • avoids probate (governed by contract law and judge’s approval unnecessary so cannot be altered by the court system)
  • valid during lifetime and after death of trust creator
  • valid if creator of trust becomes disabled during his/her lifetime
  • covers all current companion animals
  • covers all future companion animals that may be adopted by creator of trust
  • can be structured so that gifts up to the annual limit ($14,000/person or $28,000/couple in 2016) may be made on a tax-free basis

Cons:

  • less cost-effective than a clause inserted into a will

Things to Consider:

  • Is the trust creator of sound mind and free of duress?
  • Is there a rescue organization of last resort if no guardian is available or if the named guardian refuses responsibility?
  • What instructions does the trust provide regarding care, maintenance and end of life decisions?
  • Are trust funds sufficient to cover the cost of care?
  • Should a representative be appointed for distribution of trust funds?
  • Who will receive any remaining funds after all companion animals have passed away?