Wealth Advisor’s recent article entitled “Estate Planning For Pets” explains that a pet is tangible personal property—just like guns, cars, or jewelry. When a pet owner passes away, pets pass to beneficiaries by provisions in an owner’s will, by directives in an owner’s trust document, or to the heirs of the decedent under state law, if an owner does not have a will or a trust.
Pet owners should take care to select a willing care giver and make a care plan for their pet that will lower the pet’s stress in the first days after you are gone. Writing down your wishes can help your heirs avoid potential problems, if there is a need to cover expenses for food, medical requirements and transportation of the pet to the beneficiary.
One way of providing for the pet’s future care is through a trust. A trust is a legal entity created for a specific purpose. Trusts can be inter vivos (go into effect immediately while you are alive) or testamentary (go into effect upon death). In the trust document, the pet owner would designate a caregiver (and alternates) for the animal, becoming the actual beneficiary of the trust with standing to enforce the trust terms. The pet owner will also name a trustee (and alternates) to administer the trust and make sure the funding and property that the pet owner puts in the trust is managed properly for the benefit of the pet.
Pet owners have options when funding a pet trust. Funds could come from a payable on death (POD) designation on financial accounts to the pet trust. Another option is a transfer on death (TOD) registration with the pet trust as beneficiary for stocks, bonds, mutual funds and annuities. The pet owner could also direct the trustee in the pet trust document to sell assets, like a vehicle, house, or boat, and place those funds in the trust for the care of the pet.
Life insurance is perhaps another option for funding for a pet’s care. States typically do not consider a pet to be a “person,” so Puffball cannot be a beneficiary of a life insurance policy. A pet owner can fund a living or testamentary pet trust, by naming the trustee of the trust as the beneficiary of a life insurance policy. As an alternative, a pet owner may have a certain percentage of an existing policy payable to the pet trust.
Pet owners should talk to an experienced estate planning attorney about the best way of naming the trustee of a pet trust as a beneficiary of a life insurance policy.
Reference: Wealth Advisor (June 14, 2021) “Estate Planning For Pets”