Pet trust basics
A client comes to you because she has heard about pet trusts, and she wants you to prepare a trust for the benefit of her animals: Abby, a five-year-old purebred Persian cat; Phydeaux, a six-month-old puppy of mixed breed origin; and Thunderbolt, a fourteen-year old former race horse that has been rescued from the track. Where do you begin? And what information will you need to obtain from your client in order to draft a document that complies with her wishes?
First, check out the statute. The Illinois Pet Trust Act can be found at 760 ILCS 5/15.2 (West 2010). If you are unfamiliar with trusts and trustee responsibilities, you will probably want to review all of Chapter 760 regarding trusts and the Trustee’s Act. The Pet Trust Act itself is a very short, simple statute, which primarily addresses the availability and enforceability of pet trusts in Illinois. It does not, however, provide a lot of guidance regarding the “nuts and bolts” of drafting the trust agreement itself.
Next, find a form for guidance. A secondary source, such as 10 Ill. Forms Legal & Bus., Section 34:62.50, provides a sample Pet Trust based upon the form developed by Lin Hanson of the law firm of DiMonte & Lizak, LLC. Mr. Hanson was instrumental in drafting the legislation that ultimately became the Pet Trust Act.
If you still have questions, ask an expert. Attorney Lin Hanson has willingly made himself available for questions and comments regarding pet trusts in Illinois. Amy Breyer, a fellow attorney and animal advocate, who also is the Chair of the Animal Law Section of the ISBA, is another source of expert guidance. Both attorneys have been quoted extensively in numerous articles regarding the Illinois Pet Trust Act.
What information should you get from the client? Once you have mastered the basics of the Pet Trust Act, you will need to develop a checklist to ensure that you obtain all of the information that you will require from your client. The following is a list of factors and information that you should review with your client, and which will help you in preparing a comprehensive checklist for other clients in the future. Some of the information you will need includes:
1. Copies of the client’s existing estate plan. You will need to determine whether the pet trust will be a stand-alone trust, or part of the client’s overall estate planning package. You also will need to have a working understanding of the value of the client’s estate, in order to accurately advise her regarding the value of the property to be included in the res of the pet trust.
2. The name and address of the trustee and contingent trustee. You will need to determine whether the client wants to name an individual, a veterinarian school, an animal welfare organization, or even a local bank to this position. You also should advise her to carefully consider whether the trustee and the caregiver should be the same person. A good-hearted animal lover may not be the best money manager, and your client should take into consideration the strengths and weaknesses of the persons she intends to appoint to these positions of responsibility.
3. The name and address of the caregiver and contingent caregiver. You should recommend to the client that she put these individuals on notice right away regarding their responsibilities, to ensure that they are both willing and able to take on the care of the client’s pets.
4. The enforcer. Taking into account the reality that animals lack opposable thumbs, a working use of the English language, and cognizance of such terms as “law,” “court” and “enforceability,” the Pet Trust Act also allows the client to name a human being who may petition for the enforcement of the pet trust, in order to ensure that the trustee is complying with the trust’s intended uses of principal and income. See 760 ILCS 5/15.2(b)(3) (West 2010).
5. Detailed information regarding each pet to be included in the trust. This information should include the animal’s name, age, gender, species, breed, and identifying factors, such as brands, tattoos, markings, or microchipping. If you are unfamiliar with the animal, it also would be a good idea to know its expected life-span. Also, you will need to know whether the pet has any chronic health issues; whether there are any health issues common to the breed or species (such as hip dysplasia for certain types of dogs, or feline leukemia for cats); and whether the animal suffers from any allergies or requires special medication. Additionally, you will want to consider whether the animal is to be insured; some animals, such as horses and other livestock, can be insured for life and health insurance purposes, which usually requires an annual veterinarian inspection report and payment of a premium.
6. Instructions regarding the expected standard of living for the pet(s). This information should include whether the animal requires special food, its level of exercise, level of socialization, toys, and whether the animal is spayed or neutered, or can or should be bred. Also, you should know the level of veterinarian care the animal will need, and required grooming and maintenance routines, such as dental care, farrier care and any other issues specific to the species or breed. Additional factors the client should consider is whether the caregiver should receive compensation for taking care of the pet, whether the trust will pay for liability insurance of the animal bites or injures someone, and who will receive the proceeds if the animal is bred, shown or raced for profit.
The client also should consider whether the caregiver has the discretion to sell or give the animal away. What if the caregiver learns of a 12-year-old girl who is begging her parents for a pony, and meanwhile the decedent’s pony is standing around in a pasture, bored, unridden and unloved? Under these circumstances, does the caregiver have the discretion to sell the pony or give it away? Should he or she be required to consult with the trustee or the residuary beneficiaries first? If the pony is leased or sold, who receives the proceeds? Also, under these circumstances, would the trust terminate, or continue? It is the practitioner’s responsibility to ascertain the client’s wishes regarding the caregiver’s discretion if something unexpected occurs.
7. Detailed description of the property that will fund the trust. Like any other trust, the pet trust has to be funded to be effective. The client will need to designate where the trust funds will come from. A pour-over trust, a provision in the client’s will, life insurance proceeds, pay on death accounts, annuities, retirement plans, or direct transfers to the trust while the client is still living are all possible sources for the trust’s funds.
Determining how much money to put into the trust is crucial to the trust’s enforceability. Too much money could result in court interference and unnecessary legal expenses, while underfunding the trust could result in a hardship to the caregiver. These factors underscore why it is important to have a thorough understanding of the overall value of the estate.
If the majority of a client’s small estate goes towards the posthumous care of her animals, while leaving her heirs out in the cold, this could increase the likelihood of a challenge to the trust itself, or to the competency of the grantor in creating the trust. Under other circumstances, however, a substantial amount of money may be reasonable to set aside for the care of the animal, depending upon its expected life-span and the degree of maintenance the animal will required. Clearly, a four-year-old horse – with an expected life-span of 25-30 years, which will need to be maintained on property or be boarded, and which will require veterinary and farrier services, and training and exercise over the course of its lifetime – is going to require a different level of funding than a trust benefitting a ten-year old Maltese. Unfortunately, there is very little case law available to give guidance as to how much is too much, and you will need to advise your client regarding what a court would, under the circumstances, consider to be reasonable.
Finally, the client should consider what happens to the animal if the trust fund runs out of property before the pet dies. If the caregiver is unable or unwilling to continue to care for the animal with his or her own funds, the client should indicate the person or organization to whom the client would like the caregiver to donate the pet.
8. Names and ages of any beneficiaries who might receive the residue of the trust. If the trust is substantial, there may be issues regarding the residual beneficiaries, and whether the disbursement of the residuary of the trust in one lump sum after the death of the last animal would be in their best interests, particularly if the residual beneficiaries are minors. You will want to address with your client any instructions regarding the timing and the amounts of any distributions that these beneficiaries will receive after the trust terminates. You also should discuss with your client whether a residual beneficiary of the pet trust should be a charitable remainder trust, which could have some positive tax benefits for the client’s estate.
9. Animal inspection provisions. You should ask your client to consider whether she wants to include an inspection clause, in which the trustee inspects and confirms that the pet is alive and well, and receiving proper care. In the alternative, the client should consider whether the caregiver would be required to provide annual veterinarian inspection reports to the trustee.
10. Death of the pet and disposal of remains. Finally, you will want instructions from your client regarding the death of the animal, including her wishes regarding euthanasia and disposal of the pet’s remains.
Like any other trust, there are no “shortcuts” to preparing a pet trust. Drafting a pet trust can be as complicated as any other estate planning instrument. In some ways, pet trusts may pose more legal hazards, because the practitioner must imagine potential issues which could arise long after your client is gone. And, unlike other areas of estate planning, pet trusts are relatively new, and therefore there is little guidance to be found from statutes or case law. Nonetheless, your ability to give your client the peace of mind that comes from knowing that her beloved Abby, Phydeaux and Thunderbolt will be provided for well into the future is a rewarding aspect of estate planning. ■