Notwithstanding such extravagances, making sure that clients’ beloved pets live in the style to which they’re accustomed after their owner’s death is an idea that’s practical, if not kind. This is easily accomplished by including the animals in clients’ estate plans.
For the affluent, a pet trust is the best way to go, as Jason Smolen, estate planning attorney and founding principal of SmolenPlevy, in Vienna, Virginia, tells ThinkAdvisor in an interview.
He recommends that financial advisors routinely ask whether such clients own a pet and if so, proceed to suggest a pet trust.
Prominent celebrities’ pets often, and famously, inherit millions. When designer Karl Lagerfeld died this past February, he reportedly left his white cat a jumbo portion of his $300 million-plus net worth.
Real estate mogul Leona Helmsley left $12 million to her dog and nothing to two of her grandchildren. Subsequently, a judge ruled for the grandkids to receive a total of $6 million of the dog’s intended windfall, which was cut to $2 million.
Oprah Winfrey is said to be leaving $30 million to her family of five golden retrievers and spaniels.
Pets live in 68% of U.S. households, according to the American Pet Products Association. That number has been increasing because, among other reasons, many couples without children have pets; and the acquisition of comfort and emotional support animals has been on the rise.
With a pet trust, the owner appoints a trustee to take care of the animal and sets aside a defined amount of money specifically for that purpose. Without such arrangement — or at least, a designated bequest in a will — the pet may wind up in a shelter and could be euthanized.
In our phone interview, Smolen, named a Trailblazer in Divorce, Trusts and Estates by the National Law Journal, discusses when to fund a pet trust, as well as some unusual animals to which his clients have left money. A tortoise, for example. Pet tortoises can live to be as old as 100 — in tortoise years, that is.
Here are excerpts from our conversation:
THINKADVISOR: Pets are indeed precious to their owners.
JASON SMOLEN: For many people, these animals are their kids. I hate to say it, but to some, they’re more important than their kids. They’ve become very integral to the family. There are many households now without children but with pets. And owners want to take care of them [after they die] just the way they would take care of their children.
Is leaving money for a pet’s care becoming more commonplace?
It’s a growing trend. You don’t have to be part of the 1% to start thinking about this. If you don’t make arrangements for their care, some of these animals end up in shelters or pounds and are euthanized.
But can’t you just trust that a friend or relative will take care of your pet after you’re gone?
Yes. But frequently it’s been found that the animals don’t necessarily fare that well. So I recommend to almost everybody to [provide for their pet’s care] in a will or trust, depending on their circumstances. With a trust, you create a sub-trust for the purpose of giving directions for a pet’s care. That’s why we’re seeing more and more people creating trusts for their pets.
My understanding is that if you say in a will, “I leave X amount of money to my dog Spot,” for example, it has no legal standing.
Right. You have to leave it to a trustee for the benefit of Spot.
How do you go about creating a pet trust?
First, the pet owner needs to make sure everything is all in place beforehand and, especially, that the trustee is established. The owner creates the trust while they’re alive, but the trust would not come into play until they die.
What does one need to consider when naming the caregiver?
The most important thing is choosing somebody that’s willing to take the job. You really do need to give thought to whom you give that job.
What’s the process used to fund the pet trust?
Typically, following the owner’s death, the money goes into the trust for the benefit of their pet. So you need to put aside enough money to make sure that the person you indicate to care for the pet — taking it to the vet and so on — isn’t burdened economically. While the pet is alive, that money must be dedicated to the care of the pet.
What happens if and when the animal dies and there’s some money left over?