A Pet Trust Is a Three Party Agreement Similar to a Revocable Living Trust

Establish a Pet Trust!

When hotel magnate, Leona Helmsley, died in 2007, she left a bequest of $12 million to her pet dog, Trouble, while leaving family members little or nothing from her estate. After a number of court hearings the bequest was reduced to $2 million (poor Trouble). As crazy as the case was, it did bring the issue of caring for the family pet after the owner’s death to the public’s attention. The State of California has responded and passed a Pet Trust law effective January 1, 2009. Now California pet owners can establish a legally enforceable trust for the continued care of their pets in their estate plan, thus providing peace of mind to many animal lovers.

Establishing Your Pet Trust

A Pet Trust is a contractual agreement similar to a revocable living trust. A pet owner, acting as Settlor, creates a trust. They usually name themselves as the first trustee, and name other trusted individuals to succeed them if they can no longer act. The trustee manages the trust for the care of the pet, and after the pet dies, any remaining trust funds are distributed to a remainder beneficiary. A pet trust can be created as a "stand alone" trust or it can be part of a revocable living trust that you create for the rest of your estate. It can provide an immediate plan for your pet if you become incapacitated as well as direct what happens to your pet upon your death.

Terms of the Trust

A pet trust provides special instructions regarding the care of your pet. Some examples of common terms include food and diet instructions, grooming instructions, veterinary care, socialization of the pet, compensation for the caregiver and trustee, accounting instructions used to document expenses paid on behalf of the pet, how the trustee is to monitor the caregiver’s services, whether the trust will cover the cost of veterinary insurance, liability insurance in case the pet bites or injures someone, and final disposition.

The New Law has Teeth

To ensure the trustee will really care for the pet and not euthanize it and run off with the money, the new law expressly requires that principal or income can not be used by the trustee for any use other than for the benefit of the animal. Any beneficiary, any person designated by the trust, or any nonprofit charitable organization that has as its principal activity the care of animals may, upon reasonable request, inspect the animal, the premises where the animal is maintained, or the books and records of the trust. There are some limits, such as fewer reporting and accounting requirements if the trust funds are less than $40,000, but legal oversight and enforcement is in effect by reason ofthe fiduciary relationship of the trustee.

Funding your Pet Trust

Your pet trust can be funded in a number of ways. Many pet owners establish a bank account that names their pet trust as the beneficiary upon their death. Some people purchase a small life insurance policy that will fund the pet trust when they die. Others set aside a certain dollar amount or percentage of their estate to fund the trust. How much money should you set aside? This depends on the species, age and life expectancy or your pet, as well as the annual cost of care for your pet. You will also want to factor in possible emergencies that may arise, such as the cost of surgery or extended veterinary care in the event of a major illness.

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