Chapter 4 Estate Planning, Wills, and Trusts

• Library: Pet Law & Custody: Establishing a Worthy & Equitable Jurisprudence for the Evolving Family (ABA) (2017 Ed.)

Chapter 4 Estate Planning, Wills, and Trusts

"Happiness is a warm puppy."

—Charles Schulz

The passage of pet trust laws in all 50 states has served as an important indicator for courts of a cultural shift about the status of animals. Where once, an animal as property could not be a beneficiary of a trust, now, an exception under the law has been made for the family pet.

ESTATE PLANNING FOR ANIMALS

Estate planning for animals is particularly important for aging animal owners, animal owners with health problems, people who own animals that may outlive them, and animal owners who want the peace of mind that comes from having a plan in place. After all, if a client cares enough to pay for pet custody legal services, that client would likely value the importance of estate planning for pets.¹ Having a pet trust in place when contemplating flexible ownership, custody, and access means that monies are already in place should challenging circumstances arise, including an owner or co-owner's disability, incapacity, or death.

Companion animal estate planning took root more quickly than pet custody laws did and reflects animal welfare values. The traditional main instruments of estate planning include wills, trusts, health care directives, and durable powers of attorney, all of which will be discussed below. Although estate planning for companion animals is a well-developed area, from a statutory standpoint, there are significant differences between states as to the types and effectiveness of the instruments used.

Important aspects of estate planning for companion animals include estimating the animal's life expectancy; identifying suitable executors, caregivers, and trustees; and calculating sufficient veterinary and homeowner's insurance to include animals when ascertaining their reasonable living expenses. The idea is that funds will be dedicated so that the animal's lifelong needs will be met upon the animal owner's incapacitation or death.² Proper estate planning assures that the animal "property" is transferred to the designated person or trust at the right time for the animal's protection. There is a growing national trend for states to have look-back provisions to invade trusts according to certain parameters, so be up to date on your state's practices.

Euthanasia

Without estate planning by an owner, a companion animal's future could be in jeopardy. According to the American Society for the Prevention of Cruelty to Animals (ASPCA), only 17 percent of pet owners safeguard their pets' future; three to four million animals are euthanized each year.³ Euthanasia rates for companion animals following an owner becoming disabled or deceased are between 12 and 27 percent.⁴ The ASPCA estimates that every year, more than 100,000 animals enter shelters following the death or incapacity of their owner.⁵

Oral Communications

Before delving further into the basics of estate planning, a good place to begin is to have your client inform others of his or her individual goals, ideas, and intentions. Oral communications have the effect of reinforcing compliance with your client's written instruments. More specifically, explain this to your client in plain language, such as, "Be sure, Jessica, to tell Robert that you want your twin sister to get your cat."

WILLS

For estate planning purposes, lawyers are usually most familiar with the creation of a will. A will has a testator and one or more beneficiaries. A beneficiary must be a natural person or a legal entity. Because animals as property cannot own property, dispositions to animals are not enforceable; a companion animal has no standing to enforce a bequest. Wills are public documents that may be subject to probate.

Lawyers often discourage clients from using bequests under wills for companion animal estate planning purposes because of their unenforceability. For example, if a testator leaves his or her cat and $10,000 to his or her sister, the sister has no obligation to use the money for the cat's care. If the sister becomes inconvenienced by the cat and drops the animal off at a public access shelter, the sister would still be able to keep the $10,000.

A seminal case that influenced the development of uniform estate planning laws was In Re Estate of Russell,⁶ where Thelma Russell left half of her estate to a man and the other half to her dog in her will. The court determined that an animal could not be the beneficiary of a will and did not award anything to the dog. The court also determined that the man had no enforceable duty to the dog. Even though bequests under wills are not the best way to protect the future of pets, lawyers may still utilize them when it is believed that the person named to receive the bequest for the animal will respect that intent.

TRUSTS

All 50 states, as well as the District of Columbia, have enacted one of several versions of pet trust laws.⁷ Although there are variations between states about trust provisions, most reflect or are derivative from uniform laws. The best-known types of trusts are traditional trusts, honorary trusts, conditional trusts, and, more recently, pet trusts.

Traditional Trusts

In a traditional trust, three parties are involved: a settlor/trustor/grantor, a trustee, and a beneficiary. Fiduciary, equitable, and enforceable property interests are advanced. Traditional trusts are private documents not subject to probate; they can be effective even while the person is still alive. The beneficiary should be a person, not property, even if the property is a companion animal considered to be a family member. If an animal is named as a beneficiary of a traditional trust, the trust may be deemed void.⁸

Honorary Trusts

Honorary trusts are rooted in the American Law Institute Restatement of Trusts (First), (Second), and (Third). A trustee of an honorary trust may apply property to a designated purpose. In common law, honorary trusts for the benefit of an animal, though valid, are not enforceable. Like traditional trusts, honorary trusts are subject to the Rule Against Perpetuities (RAP).⁹

Conditional Trusts

A conditional trust is the best alternative to a pet trust. The settlor leaves the companion animal and monies to a trustee, and the settlor names a caretaker as a beneficiary, conditioned upon the caretaker providing for the companion animal in accordance with the terms of the trust. If the caretaker does not perform these duties, the trustee may replace the caretaker with an alternate caretaker specified in the trust. If the trustee does not provide the funds as required, the caretaker has standing to enforce the trust.¹⁰ The human beneficiary avoids the problem of the animal beneficiary having no standing to enforce the trust and the RAP, which can link the duration of the trust to the life of the caretaker. A successor or alternate trustee and caretaker need to be named, and the trustee cannot be the same person as the caretaker.¹¹ An inter vivos trust should include a residual clause.

Uniform Probate Code

In 1990, the National Conference of Commissioners on Uniform State Laws (NCCUSL), now known as the Uniform Law Commission (ULC), adopted a provision of the Uniform Probate Code (UPC) that provides for "enforceable trusts for the care of a designated domestic animal and the animal's offspring."¹² UPC section 2-907 was enacted in 1990 and amended in 1993. For states that have adopted UPC section 2-907, a trust for a companion animal is valid and the RAP is eliminated.

Uniform Trust Code

While some states have enacted UPC section 2-907, others utilize Uniform Trust Code (UTC) section 408; others fashion a hybrid of both. The main idea of a pet trust is that the testator leaves money in the trust for the animal beneficiary, and a trust protector makes sure the trustee enforces the trustee's obligation to ensure that the caregiver is paid only if the animal is still living and properly cared for.

UTC section 408, which permits the creation of trusts for the benefit of companion animals with animal beneficiaries, was implemented in 2000. An important aspect of UTC section 408 is, "A person...