Pets are no longer treated like any other piece of property. California has a law on the books under California Probate Code Section 15212 passed in 1991 which provides as follows:
A trust for the care of a designated domestic or pet animal may be performed by the trustee for the life of the animal, whether or not there is a beneficiary who can seek enforcement or termination of the trust and whether or not the terms of the trust contemplate a longer duration.
This California statute provides that you can create a trust for the care of a designated domestic or pet animal for the life of the animal. The duration will only be for the life of the pet, even if the trust instrument contemplates a longer duration.
California Probate Code Section 15212 is intended to clarify the law which may have been voidable under the rule against perpetuities provided in the California Civil Code. On the death of the designated animal, the trust permitted by Section 15212 terminates.
Before this the law treated pets like any other piece of property upon the death of their owners.
As evidence of the increasing interest in estate planning for pet owners, see Roberta C. Yafie, Trust-Fund Pets, NY Post, June 24, 2007 (stating that “[m]ore and more middle-class pet owners are opting for Pet Trusts to ensure their dependant’s are cared for”).
With the adoption of this code, setting up a trust to care for pets became a recognized estate planning technique. This law enables pets to become the beneficiaries of your will or trust.
Pet trusts are typically of two types: a testamentary trust which is designed to provide care after your death, and an inter vivos trust which provides care when you still living but no longer able to care for your animal. Inter vivos trusts can be useful if you are incapacitated or living in an assisted-living facility.
For both trusts, a caretaker is assigned to address the animal’s needs and a separate trustee is assigned to ensure that the caretaker is doing his or her job. The two greatest challenges with pet trusts are a provision known as “the rule of perpetuity” and greedy relatives.
Under rule of perpetuity, a trust becomes invalid 21 years after the death of the person that set up the trust. This can be problematic when seeking to provide for the care of long-lived pets, such as horses and birds.
The greedy relatives come into play when a pet trust is challenged in court. Pet trusts can be reduced in size when the court is petitioned to view your bequest as “over-funding.” If the judge rules that your pet-care fund is more than reasonable, that $300,000 that you left behind to care for Fido could get reduced to $30,000, and your least favorite niece could receive a windfall.
To get around the greed, you have about three options. The first is to contact a pet retirement home and fully fund your pet’s care while you are still living.
A second option is skip the trust altogether and donate your estate to a local animal care sanctuary with the stipulation that your pet receive care for the remainder of its life.
A third way to keep your pet trust out of court is to limit the size of your bequest to something on the order of a few thousand dollars per year for each year of the pet’s remaining lifespan. If you have multiple pets, one way to address the challenge of keeping them together and cared for in the manner of your choosing is to include real estate as part of the trust. The designated caretaker lives rent free as long as he or she cares for the animals.
Remember, pet care is expensive. A pet trust will give your relatives or other caretaker the means to provide for your animals in a manner consistent with your wishes. To fund such desires, some people have designated their pets as the beneficiaries of substantial life insurance policies.
To discuss this and other estate planning topics, call Mitchell A. Port at (310) 559-5259.