Last week, our blog started discussing how statistics show that almost 90 percent of all pet owners here in the U.S. consider their animals to be members of the family and how this sentiment has prompted many to execute so-called pet trusts.
To recap, 46 states, including Florida, now recognize the creation of pet trusts, which are legally binding instruments that enable pet owners to ensure their beloved animals are cared for should they die or become incapacitated.
While you might think that a pet trust has some sort of unique legal structure, its core elements and features are largely the same as other types of trusts.
Indeed, the pet trust creator appoints a trustee who will be responsible for managing, investing and ultimately distributing trust assets to ensure proper care of the animal. The pet trust creator also appoints a separate person to serve as the animal's caregiver and use the proceeds allocated by the trustee accordingly.
Legal experts indicate that a pet trust creator will want to ensure that the trust names alternate caregivers, outlines the animal's everyday needs, establishes wishes for emergency or end-of-life care, and sets forth what is to be done upon the death of the animal.
It must be noted that the Internal Revenue Service does recognize pet trusts for tax purposes provided they are executed in accordance with state law. However, pet owners should be aware that 1) assets passed to a pet trust will be included as part of their taxable estate upon their demise and 2) trust assets do not qualify for a charitable deduction even if the amount remaining after the pet's death is gifted to a remainder beneficiary that otherwise qualifies as a charitable organization.
Given some of the complex legal considerations involved in the creation of a pet trust, pet owners should give serious consideration to sitting down with an experienced estate planning attorney to learn more about the law, possible tax treatment and their best options going forward.