Almost 60% of all homes in the United States have at least one pet. And yet, pets are often overlooked when it comes to estate planning. One particular reason for this is because pet trusts have proven to be notoriously difficult to enforce. In a typical situation, an owner will draft a provision setting aside a portion of their assets for their beloved animal. Obviously, the gift cannot be given to the animal outright because the pet would have no idea how to manage that money. Instead, the posthumous gift is placed in trust, with a caretaker appointed to use those assets for the benefit of the animal in question. The problem is that there is no “watchdog” to make sure that the caretaker uses the money appropriately. California Law did not have any provisions by which a pet trust could be enforced in favor of an animal beneficiary. The owner of the pet merely had to trust that their appointed caretaker would continue to watch over their pet. What often happens is the animal is neglected while the caretaker spends the money on himself.
Due to this problem, often times the sick or elderly choose not to purchase a pet for fear that there will be no one to take care of it in the event of the person’s passing. This is unfortunate because many of these people could benefit from having a pet around to keep them company and to increase their quality of life.
In 2009, a new law came into effect which provides mechanisms for the enforcement of a pet trust. The law provided that the trust or the court may designate persons to oversee the caretaker to make sure they are properly taking care of the pet. Furthermore, the law allows “any person interested in the welfare of the animal,” as well as “any nonprofit charitable organization that has as its principal activity the care of animals” to bring an action to enforce the trust.
Under the law, remainder beneficiaries, those who would receive any balance of the trust assets upon the passing of the animal, would have the right to make reasonable requests for an accounting of the trust assets to make sure the caretaker wasn’t wasting the assets. This power is also given to nonprofit corporations who are principally interested in the care of animals. Beneficiaries, appointed pet guardians, and interested pet care corporations also have the right to reasonably request an inspection of the animal and the premises where the animal is kept.
While the new law addresses the age old problem of enforcing a pet trust, it also creates new issues which may require careful consideration. The language with regard to who can enforce the pet trust is very broad. Oftentimes owners may not want random persons or organizations to be able to meddle in their business, especially if the actions are frivolous or unwarranted. Moreover, many potential trustees or caretakers might balk at the responsibility due to the increased potential for liability. The good news is that careful drafting can most likely narrow the scope of liability to an appropriate level for the individual creating the trust. There are also additional provisions which can be placed in a pet trust to create more oversight without significantly expanding caretaker liability, such as providing for a Pet Care Panel or a Trust Protector, who is generally a neutral entity granted with the power to make changes to the trust in order to protect the pet.
There is quite a bit of thought that goes into planning for a pet’s care after your passing. If you or a loved one has pets which are not yet provided for in an estate plan, you should talk to your attorney about the myriad of issues and options surrounding pet trusts.
Brian Y. Chou is an estate planning attorney based in Southern California at the Law Firm of Barth Calderon, LLP.