Estate Planning: Include Your Pets!
By: Rob Clarfeld - December 15, 2017
During estate planning meetings with clients, provisions for the ongoing care of pets should be considered. Absent language to the contrary, pets are considered “personal property” and distributed to whomever receives furniture, cars and the other non-financial possessions of the deceased. Sometimes there are easy solutions such as a friend or family member who would welcome a furry addition to their family, without creating a financial hardship. When this is not the case, a solution can be a pet trust – essentially a vehicle for providing for the ongoing custody and costs of pet ownership. Similar to other types of trusts, they can be created and funded currently (inter vivos) or upon death through one’s will (testamentary).
As with any legal document, since a pet trust does not provide for the pet’s immediate needs upon one’s passing, we recommend a Letter of Final Wishes (LFW) that is readily accessible to family members. As pertaining to pets, the LFW should specify the person assuming immediate responsibility for caring for your pets (caregiver), even if only temporarily, as well as details on diet, meds, and contact information for their veterinarian.
Pet trusts provide descriptive information along with funding for the cost of their maintenance. You (the “settlor”) create the trust, name the caregiver who will have custody of the pets and the trustee who makes financial decisions, along with their alternates and successors. The same person can fulfill both responsibilities. Essentially, expenses generally are paid out periodically for ongoing care. The trustee also can distribute funds for veterinary expenses. Occasionally, compensation provisions for the caregiver are specified.
As with all funding vehicles, judgment is required to determine adequate funding. I recommend multiplying the pet’s estimated remaining life by estimated annual expenses, including vet care. I like adding a 50% cushion for late life medical expenses. As with other types of trusts, you can designate the remainder beneficiary who ultimately receives any undistributed funds.
Taking on the responsibility of ownership of our furry friends requires a lifelong commitment – not just for the lifespan of the pet, but also for instances where pets might outlive their owners.
Article source: Forbes.com
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