If you are a pet owner, chances are you love your pets and consider them family members. We love them, we buy them toys, and it is not usual for people to bury their beloved pets in pet cemeteries. However, we often do not make plans for what will happen to our pets if we should die before them. Ask at any animal shelter – many of the animals arrive at the shelters when children or relatives do not want to or cannot care for the pets of deceased family members. In 1990, changes to the Uniform Probate Code recognized the creation of Pet Trusts, and states began to enact pet trust laws that govern in the event of an owner’s death or disability.
The state of Florida enacted laws to authorize the establishment of pet trusts in 2003, allowing petowners to plan for the care and maintenance for their pet’s lifetime. An article in The Naples Daily News, “Pet Trusts Gaining Popularity.” explains the fundamental issues involved.
Now almost every state recognizes these trusts (which vary in each state). A named trustee will typically be responsible for the investment, management and distribution of the trust assets. Another individual is named to avoid conflict of interest as the pet’s caregiver. The trust will include details for caregivers, medical needs, and the final arrangements for the pet’s death.
However, Internal Revenue Code typically doesn’t recognize pet trusts, as an animal isn’t a “person” by definition. The trust wouldn’t work because it doesn’t have a legal "beneficiary.” Nonetheless, the IRS does recognize pet trusts for tax purposes.
If the trust is validly established under state law, the assets passed to a pet trust are included in the decedent’s gross taxable estate. But no part of the assets qualifies for a charitable deduction—even if the remainder beneficiary after the passing of the pet is a qualifying charity.
You should speak with a qualified estate planning attorney because estate taxes and other expenses attributable to the trust will need to be considered when drafting a pet trust. Planning for your pets can be an important part of your estate planning process. Make sure that all members of your family—including your pets—are cared for in your estate plan. For more information on pet trusts, contact us today.
Reference: Naples Daily News (August 17, 2015) “Pet Trusts Gaining Popularity”