In the rush to button down an estate plan, people often spend most of their time focusing on the big questions and overlook small—but increasingly crucial—details.
According to a recent article in the Wall Street Journal, there are approximately 400,000 pets each year looking for new homes because their owners die. Pets are part of the family so it only makes sense to provide for them when planning your estate. That may mean simply entrusting their care to another family member or establishing a formal Pet Trust, authorized in 46 states and the District of Columbia.
A Pet Trust may be created under a Last Will and Testament or a Revocable Living Trust. Either way, there generally are four parties to any Pet Trust: the trustee, the caretaker, the pet (one or more) and the remainder beneficiary. In addition, a Pet Trust should have property contributed to it to adequately fund the lifelong care of your pet.
The trustee may be an individual, a corporate fiduciary, or both. As with most choices, there are advantages to each approach. The same is true with the caretaker. However, it may be prudent to ensure that the trustee and the caretaker are not one in the same.
While a trusted friend or family member likely knows your pet better than any outsider, whenever money is involved… there also lurks the temptation for mischief. For example, there have been reported instances where pets have died, only to be replaced by look-alikes so the trustees/caretakers continued to receive compensation for their services. Also, remember to appoint successors in case a primary trustee or caretaker is unwilling or unable to serve.
The remainder beneficiary is the party designated to inherit any remaining trust property upon the death of the last surviving pet beneficiary. Typically, the remainder beneficiary is a family member, friend or charity.
So, just how much of a nest egg do you need to set aside to fund the future care of your pet? The amount depends on two variables – the life expectancy of your pet and the projected cost of care. Your veterinarian is an excellent resource when estimating the life expectancy of your pet, just as your check register is an excellent resource to calculate the actual cost of annual care. Once you know the likely remaining life expectancy of your pet and the historical cost of care, simple multiplication is all that is needed to determine the amount of trust property required to provide the appropriate nest egg. You may want to err on the conservative side, too, since inflation will affect the future cost of care for your pet.
Reference: The Wall Street Journal (July 23, 2011) “When Estate Plans Fail”