An increasing number of Americans are including pet care in their estate planning. Currently, 67% of U.S. households own at least one pet, and many people now consider long-term planning for them just as important as they would for two-legged family members.
Fidelity Investments has tips on its website for pet owners, advising them to be upfront about what is needed to care for their pets and stating that once a caregiver has been identified, a plan should be put in place detailing what needs to happen immediately after the death of the owner.
Some questions you may want to explore include the following:
• What is the difference between a pet trust and a will?
• Does it vary by state?
• Is the trust independent from the will?
• What happens to the leftover funds after your pet dies?
• Can you designate money from your 401(k) to care for a pet?
While you can leave money to a loved one or friend to care for the pet in a will, there’s no guarantee the money will be used to that end.
A trust, though, is more legally binding when it comes to caring for animals and can be specific, including how often a pet should see the vet and cover its standard of living.
In a pet care agreement, the executor or lawyer could go to court to enforce the contract.
Atlanta attorney Nancy Goodman says a pet cannot be named as a beneficiary of 401(k) or IRA.
“It is possible to name a trust as a beneficiary of a retirement account, but the funds would be subject to immediate taxation if payable for the benefit of a pet,” she said. Goodman added that it’s generally advisable to use retirement funds to provide for a person or persons, so that required minimum distributions are payable — and taxed — over the lifetime of the oldest beneficiary. That preferred tax treatment doesn’t work for non-persons such as animals or charities.
When choosing someone as a designated caregiver for your pet, it is important to check in periodically with this person in case their situation has changed in some way that they are no longer able to care for your pet. It is also important to keep in mind the needs of your pet as they change over time.
Finally, it is worth noting that the type of pet that you have should play a huge part in who you choose as a designated caregiver – while you might more easily find someone who is willing and able to care for a cat or dog, it might be more challenging to designate a caregiver for a pet horse.
Here are some important tips for including pets in your estate planning:
- Consult with an attorney and financial adviser.
- Research pet care and trust information that may vary by state.
- Select the pets’ guardian and perhaps a backup, should the original guardian die or become ill. Be sure that the person chosen has given their clear consent.
- Make sure the agreement is legally binding and not just a handshake.
- Write detailed instructions for the pets’ care. This information may be especially useful immediately following the death of the owner. It can include medical information, health issues and daily care.
- Formalize plans in a pet trust or pet protection agreement. These legally binding agreements can provide for the care of your pets when the owner is incapable of caring for them.
- Select a remainder beneficiary. This person or organization will receive any funds left in the trust after the pets die.
For help including your pets in your estate plan, contact us at Wilson and Wilson Estate Planning and Elder Law, LLC, 708-482-7090 or email@example.com