If you would like to leave funds for the care of your pets after you’re gone, a pet trust is a great way to accomplish this goal. When establishing a pet trust you will need to make several choices about the form and content of the trust. Below you will find explanations of various factors you should consider regarding your pet trust.
1. Form of the Trust
A. Testamentary Trust
One type of pet trust is a testamentary pet trust. A testamentary trust is formed from the terms of a decedent’s will. To create this type of trust, you will need to update your will to include a gift to your pet in trust, along with any instructions you wish to include. The benefits of a testamentary trust are that there is minimal administrative work during your lifetime, and if none of your pets survive you, the gift will lapse and a trust need not be created at all. The downside to a testamentary trust is that it does not go into effect until your death, meaning that if you are disabled or incapacitated, the trust will not start covering the cost of your pets’ care. A testamentary trust also will not shield any assets from estate taxes.
B. Inter Vivos Revocable Trust
An inter vivos trust is established and funded during your lifetime, though you can also leave assets to an existing trust in your will. With a revocable pet trust you retain the ability to modify the trust after it is established. The benefit of an inter vivos trust is that the trust can take effect before you pass away, ensuring that there is no gap in the care of your pets. It also avoids the probate process for those assets that are held by the trust at the time of your death. It does, however, mean more work on your end to establish and administer the trust, which may turn out to be for nothing if you have no living pets at death. Additionally, by making the trust revocable, you retain control over the assets and any income the trust makes is attributable to you.
C. Inter Vivos Irrevocable Trust
A second type of inter vivos trust is an irrevocable trust. With this type of trust you do not retain control over the trust assets. A transfer of assets to an irrevocable pet trust may be subject to gift tax, and you cannot reclaim any assets once they are transferred to the trust. On the other hand, an irrevocable trust does provide some protections from creditors not available with other types of trusts.
2. Trust Content
A. Trust assets
You can fund a pet trust the same way you would any other trust. However, Minnesota Statute § 501C.0408 allows a court to reduce the amount of money in a pet trust if it is “unreasonable” for its purpose. When determining how much money to leave to your pets, you should consider your current annual costs of pet ownership, the life expectancy of your pet(s), any desired compensation for your chosen caregiver, and the need for any extra funds for emergencies. You are not limited to just funding the trust with money. You can also put property into the trust, so that the income produced by said property is used to care for your pets.
A very important part of your pet trust is choosing a caretaker to take your pets after you pass away or become disabled. It is recommended to name one or more successor caretakers as well, in case your first choice is unable to serve. You should seek the permission of your planned caregivers(s) ahead of time so you know that they are willing to take on this role. You may designate the caretaker to also be the trustee of the trust, or you can name a separate trustee. Minnesota Statute § 501C.0408 also allows you to name a separate “enforcer” who has the power to enforce the trust.
C. Remainder Beneficiaries
You will also need to designate where the remainder of the trust assets will go after your pets pass away. For example, the remainder could go to the heirs of your estate, other friends or relatives, or a charity. If the trust is testamentary, you can designate a different recipient in the event that no pets survive you, or you may let the amount of the would-be gift remain part of the residue of your estate, which you likely will have provided for elsewhere in your will.
D. Other Provisions
There are other things you may wish to include with the trust such as specific care instructions, limitations on decisions than can be made about your pets, or instructions for your pets’ end of life care. You can choose to include an attachment to your trust document detailing information regarding your specific pets. You also have the option to pay a stipend to the person who cares for your pets. If there are any other provisions or directions you want to include in the trust, you can talk to an attorney about having them included.
If you would like to set up a pet trust, attorneys at Dudley and Smith can help you determine which type of trust best fits into your overall estate plan. Contact our office to learn more about pet trusts. We would love to help you protect your pets!
The law is continually evolving and Dudley and Smith, P.A.’s blog posts should not be relied upon as legal advice, nor construed as a form of attorney-client relationship. Postings are for informational purposes and are not solicitations, legal advice, or tax advice. A viewer of Dudley and Smith, P.A.’s blog should not rely upon any information in the blog without seeking legal counsel.