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Financial Planning > Trusts and Estates > Estate Planning

Estate Planning For Your Client's Best Friend

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Estate planning is for anything but the dogs. Or so it would seem to animal owners who find the profession bereft of advisors who know enough to include provisions for beloved pets into their clients’ all-important trust documents.

The techniques and best practices needed to address this much overlooked area was the focus of a one-hour presentation held on April 24 at ‘s Metropolitan Dog Club. Titled “Estate Planning with your Pet in Mind,” the talk was given by Frances Carlisle, a New York-based attorney who specializes in such planning.

“Estate planning for the care of animals is largely ignored by most estate planners,” said Carlisle. “Many of my clients come to me saying they were dissatisfied with a former advisor who did not take planning for their pet seriously. This needs to change.”

The problems that can arise from inadequate planning, said Carlisle, was widely publicized following the death of billionaire Leona Helmsley. The operator and investor bequeathed $12 million for the care of her dog, Trouble, in an inter vivos trust. Carlisle noted that, even allowing for the most lavish and excellent care, the amount was excessive. The huge bequest resulted in numerous “death and kidnapping threats” made against the dog.

“Any plan that puts an animal in that kind of jeopardy is not good,” said Carlisle. “It’s reported that more than $200,000 per year had to be paid for the dog’s round-the-clock security. And that amount was much more than any other expense devoted to the animal.”

Putting too much money into the trust also raises a legal issue in that it may run afoul of a state’s pet trust statutes. Carlisle, who focused at length on New York’s law (N.Y. Estate Powers and Trust Laws Law, Section 7-8.1), pointed to Paragraph (d) of the statute, which stipulates that ” a court may reduce the amount of property transferred if it determines that amount substantially exceeds the amount required for the intended use.”

A second problem with Helmsley’s will is that it bequeathed Trouble to the billionaire’s brother, who did not want the dog. Carlisle said that she always recommends placing a pet into the trust (in addition to assets necessary for the animal’s upkeep). The trustee thus has a fiduciary duty to safeguard the pet’s well-being, which may entail placing the animal in the care of an animal rescue or charitable organization if family members or friends cannot be found who are up to the task.

Yet a third flaw in Helmsley’s will: The document stipulated that Trouble’s ashes upon the dog’s death be placed next to Helmsley herself at Woodlawn Cemetery in New York City. That was a problem because the cemetery’s laws do not permit animal remains to be buried with those of humans. One solution for pet owners faced with this predicament, said Carlisle, is to purchase a plot in a pet cemetery where both master and dog can be laid to rest.

Of the two principal means for providing for the care of an animal upon the owner’s death–a bequest through a will or via a revocable trust–the first is simplest, said Carlisle. In addition to naming a person in whose care the animal should be placed, the document should also stipulate several alternate care-givers in the event the deceased’s heir reneges on the commitment.

Carlisle noted, however, that pet trusts (which now exist in 38 states) provide greater protection of animals than do wills. Of the two types of trusts available to pet owners–inter vivos (created during the owner’s life) and testamentary (created at death)–the latter is the more common, she said. But Carlisle observed that an inter vivos trust may be advantageous in that the vehicle can be activated should the owner become incapacitated.

A disadvantage of the New York statute is a provision limiting the trust’s life to 21 years. This restriction, said Carlisle, may be acceptable in situations where an owner dies leaving behind a young puppy, but it could be a problem in the event the owner adopts a puppy some 10 or 15 year’s after the trust’s creation.

As with trusts created for the benefit of children or other heirs, a pet trust can be funded with cash or other assets in the owner’s estate–including a life insurance policy in which the trust is named as the beneficiary. Carlisle cautioned, however, against over-funding the policy, lest the trust grantor run afoul of Paragraph (d) of the New York’s Pet Trust statutes. She added that the choosing of a trust remainderman is important because this individual has standing to complain about inadequate expenditures devoted to the pet’s care.

“I recommend to my clients that they consider selecting an animal-related charity as the remainderman, as the people who operate such charities are usually more sympathetic to generous expenditures for animals, such as expensive veterinarian care, than a family member might be,” said Carlisle. “Also, the language drafted for the trust should refer to all animals owned by the decedent. If the document provides for only specific named animals, then it won’t cover those the owner might adopt after the trust’s creation.”

Carlisle also cautioned participants to be mindful of paragraph (e) of New York’s statute, which grants the courts power to appoint a trustee if no one is designated, or if no individual is willing or able to serve. To provide for “checks and balances,” she noted that owners can name a court enforcer and caretaker, in addition to a trustee, to ensure the animal is adequately provided for. Trust funds can also be set aside to compensate these individuals.

Carlisle added that it’s “generally preferable” to provide directions for the care of pets in a side letter to the trustee, rather than in the trust itself. That will allow for greater flexibility to meet changes in the requisite of level of care or of newly adopted pets.

Carlisle observed also that owners should develop short-term arrangements to provide for a pet’s care during the period after the owner’s death and before the will or trust is probated, which can take upwards of several months. The owner should also execute a power of attorney to allow a third-party to handle financial matters–including providing funds for a pet’s care–in the event the owner becomes incapacitated.


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