Many pet owners are concerned about how their pets will be cared for after the owner dies or becomes incapacitated. Existing estate plans can be easily modified to at least partially address this problem. A client’s durable power of attorney and/or revocable living trust can be amended to instruct the agent and/or trustee to care for the pet (or several pets) in the event of incapacity; the revocable living trust (or if none, then the will) can gift the pet to alternate caretakers, perhaps along with a specified gift of money, provided they agree to take care of the pet. However, the problem with these methods is enforceability. A pet is not a person able to seek redress with the courts.
Because a pet is not a person, a direct gift to a pet is void, and so former Probate Code § 15212 was enacted in 1991 to allow pet trusts set up with pets as beneficiaries. However, setting up a trust to care for a pet, including veterinary care, requires significant funding—at least $10,000 and perhaps much more—a significant problem in that under this former code section there was no enforcement mechanism, no current beneficiary or responsible person to petition the courts.
In 2009, former Probate Code § 15212 was replaced by new, improved Probate Code § 15212 which has more teeth in that various parties will have standing to enforce the trust. Unless the trust instrument provides otherwise, trust assets and income may not be converted to the personal use of the trustee. The trust terminates on death of the last animal for which it was established, and which was alive on the date of settlor’s death. Class gifts are permissible, to include care of any animals acquired subsequently by the settlor. The trust is not subject to termination based on the trust corpus not exceeding $40,000, or based on the 21 year limit for honorary trusts. Unless directed otherwise in the trust agreement, upon termination any remaining assets will be distributed under the residuary clause of settlor’s will, or to settlor’s heirs.
The enforcement provisions are key, and work as follows: 1) the trust agreement can designate a person to enforce the trust; 2) if none is designated, then the court appoint someone for that purpose; and 3) in addition, the court may be petitioned by any person interested in the welfare of the animal, or by any nonprofit charity caring for animals. Also, note that while accountings are not required if trust assets do not exceed $40,000, unless the trust instrument requires accountings, in spite of this any beneficiary has the right to inspect not only the books and records, but the animal and the premises. Therefore, naming an animal protection organization as remainder beneficiary may be a solution with real teeth. (However, note that no charitable deduction will be allowed if the trust is able to provide full support to the animal for life.)
Although having the trustee serve as caretaker is simplest, ideally these should be separate persons so that the trustee can replace a caretaker who is not caring appropriately. The trustee needs to be paid a reasonable fee for its work, and the caretaker may be given an annual gift but generally should not be the remainder beneficiary due to the obvious conflict of interest. If the settlor does not know of anyone personally who is suitable, the settlor may wish to name a local animal protection organization as caretaker (and perhaps donate as well). The organization will try to arrange adoption of the animal.
The trust can include specific care guidelines for the pet, noting medical history and preferred veterinarian.
If the settlor does not have funds available to fully fund the pet trust, it can be funded later upon incapacity under separate provisions in the settlor’s durable power of attorney or main living trust. A small life insurance policy may be used to fund the trust upon death.