Your Estate Matters
Who will take care of Spot and Smudge after you die?
TRUSTS for pets are every bit as complex as trusts for people. In 2005, Hawaii adopted a new law which allows pet owners to set up trusts to protect their pets.
Many people have wanted to leave money in a trust to care for their pets. In some cases, they succeeded. In many cases, they did not. This occurred because, historically, the law treated animals, however beloved by their owners, as property. You could give away an animal, but you couldn't give anything to an animal.
The law being the way it was, state courts were forced to either invalidate trusts set up for pets, or to fashion legal theories that allowed such trusts. The results varied from state to state. In a few states, the courts granted trusts for pet some protection. In many states, the courts granted little or no protection for such trusts.
Faced with uncertainty, pet owners lobbied their state legislatures to pass laws recognizing trusts and other arrange- ments for pets. Wisconsin passed such a law in 1969. California passed such a law in 1991. From 1995 through 2005, more than 30 additional states adopted such laws. Hawaii joined the pack in 2005 by adding H.R.S. Section 560:7-501 to its Probate Code.
H.R.S. Section 560:7-501 specifically allows trusts for "the care of one or more designated domestic or pet animals." These trusts largely work as you would expect: There is a trustee to manage the money, the pets are the beneficiaries, and the trust tells the trustee who receives the remaining funds after the pets have died.
When designing a trust for a pet, there are special considerations that do not normally come up with people. For example, most trusts do not give the trustee the power to end the life of the beneficiary.
So, should the trustee have the power, upon the recommendation of a veterinarian, to have a crippled or suffering animal euthanized?
Another consideration is the trustee. You may trust your son to be trustee for his siblings, or his children, but do you trust him to manage money for your pet? If the trustee simply takes the money (or gives it to the family), your pets are not going to call the police, hire an attorney or go to court. Someone has to do that for them.
If the trustee took money belonging to people-beneficiaries, those people (or their parents or conservators) could call the police, hire an attorney and go to court, if necessary. Pets need someone to speak for them.
There is also the cost of administering the trust -- trustee compensation, state and federal income taxes, the costs of preparing the tax returns and legal fees -- if the trustee needs advice from an attorney on a trust matter.
If you plan to leave a fairly small sum of money for a pet, you may be better off leaving the pet and the money to a trusted person who will adopt the pet. There will be no trust, and less of the money will go to administrative overhead and more to caring for the pet.
While trusts for pets largely work as you would expect, there is one major exception. HRS Section 560:7-501 contains the following provision:
"The court may reduce the amount of the property transferred if it determines that the amount substantially exceeds the amount required for the intended use and the court finds that there will be no substantial adverse impact in the care, maintenance, health, or appearance of the designated domestic or pet animal."
You can leave $1 million to a person, but if you did the same for your pet, the contingent beneficiaries of the trust could ask the court to reduce the amount of the pet's trust to whatever amount they can convince the judge is sufficient to take care of the pet.
If the pet has a life expectancy of five years, and the judge decides that $5,000 a year is sufficient to care for the pet, then the judge might reduce the pet trust from the $1,000,000 you intended to only $25,000. Careful drafting may help to protect the amount you selected, either by explaining why you feel the amount selected is appropriate, or by discouraging beneficiaries from asking the judge to reduce the pet trust.
If you have a pet, you must consider what will happen to your pet should you become incapacitated or die. Have a plan and discuss it with your relatives or friends. In many cases, family members or friends will adopt a deceased owner's pet. Unfortunately, though, some pets will end up at the local animal shelter where their only hope for survival is to be adopted.
If you would like to explore formal legal arrangements for your pet, you should contact your estate planning attorney. You can also contact the Hawaiian Humane Society to request their "A Legacy of Caring" packet, which contains useful information and forms relating to the care of pets who outlive you or your ability to care for them.