All too often, the family pet is not taken into consideration when estate planning is addressed. Now that the Massachusetts legislature has enacted a “Pet Trust” statute (Mass Gen Laws Chapter 203, Section 3C), it seems an appropriate opportunity to write on the subject.
An estate plan should address not only the guardianship of minor children, distribution of assets, and taxes, but should also address the care and feeding of one’s dog, cat, or other pet (we’ll call her “Bella”). Pets are part of the family, and if the purpose of the estate plan is peace of mind, then the plan can’t be complete unless we are comfortable that Bella will be cared for.
Pets are generally – for legal purposes – viewed as tangible personal property. As such, Bella would (unless specifically addressed in your Will or Revocable Trust) pass to the same beneficiaries who would receive the “residuary” of your estate.
Specifically addressing this matter can avoid serious disagreement among your beneficiaries. If your estate plan ultimately passes your assets to your children, then the results could run the gamut of all the kids wanting Bella (and possible feelings of long-term resentment) to none of them really wanting her (and Bella being grudgingly care for). In my experience, while more money is wasted fighting about the distribution of financial assets, more long-term resentment results from survivors’ haggling over personal assets.
The good news is that you can do your part by including in your Will clear direction as to whom should enjoy Bella’s companionship after you have died. As with other estate planning considerations, it may not be easy to decide what to do…but once you have decided, your wishes can be reflected in your Will.
So much for the “personal” side of the discussion. Now for the financial. Once Bella’s “guardianship” is clearly expressed, it is prudent to also provide funds for her care. All pet owners know that not only does the cost of daily care and feeding of our pets add up, but illness or injury can be especially dear. I personally have experienced the personal and financial pain of canine surgery on more than one ocassion.
Historically, the only way to provide funding for Bella’s care and feeding was to leave the funds to a friend or family member and trust him or her to use the funds only for Bella. If such funds were left in trust form, the trust was known as a “traditional pet trust.”
This has now changed in Massachusetts. Our new statute expressly recognizes the legal validity of a trust for Bella’s express benefit. There are restrictions in the statute that will apply to these trusts, but at least now they will have legal effect.
Generally, the statute provides:
- The pet trust must terminate upon the pet’s death unless the trust provides for an earlier termination;
- No portion of the principal shall be converted to the use of the trustee, unless stated otherwise in the trust or used for reasonable trustee fees and expenses;
- A court may reduce the amount of property held by the trust if it determines that the amount substantially exceeds the amount required for the intended use;
- The court shall name a trustee if one is not designated in the trust, and the court may transfer the trust property to another trustee if transfer is necessary to ensure that the trust’s intended use is carried out;
- The intended use of the principal or income may be enforced by an individual designated in the trust, by the person having custody, by a remainder beneficiary, by an individual appointed by the court, or by a charitable organization;
- The Settlor of the trust or the pet’s custodian may transfer custody to the trustee at or subsequent to the creation of the trust.
What about the puppies? So what happens if your idea of a pet trust does not jive with the statutory parameters? I suppose you could still execute a traditional pet trust, and specify any provisions you wish (except to the extent any such provisions might be interpreted as contrary to public policy). Under a new statutory provision in Massachusetts (to be in effect as of January 1, 2012), you would also be able to implement the law of a different state whose pet trust statute might be more to your liking (again, subject to Massachusetts’ public policy).
For example, as indicated, the Massachusetts statute requires that my pet trust terminate upon Bella’s death. But what if Bella has puppies after my death? I care as much about their welfare as I do Bella’s. And what if Bella is a champion (I think she is!) and my plans were to breed her selectively. Why can’t I specify which breeder will breed Bella, and provide funds for the puppies’ care? Under the Massachusetts statute, the pet trust I establish can apparently only provide funds for Bella’s care and not for the care of her puppies.
Can this (or other issues) be addressed under the new statute? There is nothing in the statute that specifies how to enact the terms of the statute. I suppose any trust which states that (i) Bella will be the beneficiary and (ii) Massachusetts law controls, will invoke the new statute. If the trust is drafted under Massachusetts law and specifically provides that an individual (and not Bella) is the beneficiary, then presumably a “pet trust” has not been created. In that case the trust would (as a traditional pet trust) contain language imploring, but not requiring, that funds be used only for Bella’s (and her puppies?) care. The traditional pet trust therefore may allow more flexibility than a statutory pet trust.
More flexibility invariably invokes complications. The most substantial drawback to traditional pet trusts is the fact that there is no legal obligation for the trustee to use trust funds for Bella’s benefit. In addition, income taxation of a traditional pet trust is more complicated than that of a statutory pet trust.
The bottom line here is that our pets need our attention, not only on a daily basis, but also when addressing our estate planning. There may be alternate approaches regarding providing funds for their care after we are gone, and the new Massachusetts statute provides an important new vehicle for our consideration.