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Providing For Your Pet With A Trust

Beezer the cat can be a member of the family, but what happens to Beezer or [insert your pet's name] after you are gone? How can you ensure your pet will be cared for? One option is to create a pet trust. While you can give directions in your will to leave your pet to a caretaker, there is no guarantee that the caretaker will continue to care for your pet. A pet trust can provide a little more security for the pet because a third party -- the trustee -- is obligated to ensure the pet is cared for.

A trust is a legal arrangement through which one person (or an institution, such as a bank or law firm), called a "trustee," holds legal title to property for another person, called a "beneficiary." With a pet trust, the trustee makes payments on a regular basis to your pet's caregiver and pays for your pet's needs as they come up.

The federal tax code does not recognize a pet as a beneficiary of a trust. However, 37 states — including Arizona (A.R.S. §§ 14-2907 & 14-10408) — and the District of Columbia have laws allowing pet trusts. Even if your state doesn't recognize a pet trust, you may be able to set up the trust in New York as long as the trustee is located there. Another option is to set up a traditional trust and place the pet in the trust along with the funds. The pet's caregiver can be named the beneficiary.

Just What Is An
Estate Plan?

A Guide by Steven W. Cook, Esq.

The first step is to contact your attorney. Regardless of what type of trust you use, the following are some elements the trust should include:

  • Caretaker. The trust will need to name a caretaker who will be willing and able to care for your pet. The caretaker should be someone who is comfortable with your animal.
  • Care Instructions. The trust should include specific instructions on all aspects of the pet's care, including the brand of food, activities the pet enjoys, and the preferred veterinarian.
  • Funds. The amount of money necessary to fund the trust depends on the individual animal. Typically, you can leave the money to the trust in your will. Be warned that under most pet trust laws, the court can reduce the amount of caretaking funds to what it deems is reasonable for the care of the pet.

Arizona Pet Trust Law

Below are some of the Arizona statutes that set forth Arizona's laws applicable to pet trusts.

A.R.S. § 14-2907 provides the following in regard to trusts for pets:

  1. If a trust is for a specific lawful noncharitable purpose or for lawful noncharitable purposes to be selected by the trustee and there is no definite or definitely ascertainable beneficiary designated, the trust may be performed by the trustee for not longer than ninety years whether or not the terms of the trust contemplate a longer duration.
  2. A trust for the care of a designated domestic or pet animal is valid. The trust terminates when no living animal is covered by the trust. A governing instrument shall be liberally construed to bring the transfer within this subsection, to presume against the merely precatory or honorary nature of the disposition and to carry out the general intent of the transferor. Extrinsic evidence is admissible in determining the transferor's intent.
  3. In addition to the provisions of subsection A or B, a trust created under this section is subject to the following:
    1. Except as expressly provided otherwise in the trust instrument, no portion of the principal or income may be converted to the use of the trustee or to any use other than for the trust's purposes or for the benefit of a covered animal.
    2. On termination, the trustee shall transfer the unexpended trust property in the following order:
      1. As directed in the trust instrument.
      2. If the trust was created in a nonresiduary clause in the transferor's will or in a codicil to the transferor's will, under the residuary clause in the transferor's will.
      3. If no taker is produced by the application of subdivision (a) or (b) of this paragraph, to the transferor's heirs under section 14-2711.
    3. For the purposes of section 14-2707, the residuary clause is treated as creating a future interest under the terms of a trust.
    4. The intended use of the principal or income can be enforced by a person who is designated for that purpose in the trust instrument or, if none, by a person appointed by a court on application to it by any person.
    5. Except as ordered by the court or required by the trust instrument, no filing, report, registration, periodic accounting, separate maintenance of funds, appointment or fee is required by reason of the existence of the fiduciary relationship of the trustee.
    6. A court may reduce the amount of the property transferred if it determines that amount substantially exceeds the amount required for the intended use. The amount of the reduction, if any, passes as unexpended trust property under paragraph 2 of this subsection.
    7. If no trustee is designated or no designated trustee is willing or able to serve, a court shall name a trustee. A court may order the transfer of the property to another trustee if this is necessary to assure that the intended use is carried out and if no successor trustee is designated in the trust instrument or if no designated successor trustee agrees to serve or is able to serve. A court may also make other orders and determinations that it determines advisable to carry out the intent of the transferor and this section.

A.R.S. § 14-10408 provides the following in regard to trusts for pets:

  1. A trust may be created to provide for the care of an animal alive during the settlor's lifetime. The trust terminates on the death of the animal or, if the trust was created to provide for the care of more than one animal alive during the settlor's lifetime, on the death of the last surviving animal.
  2. A trust authorized by this section may be enforced by a person appointed in the terms of the trust or, if no person is so appointed, by a person appointed by the court. A person having an interest in the welfare of the animal may request the court to appoint a person to enforce the trust or to remove a person appointed.
  3. Property of a trust authorized by this section may be applied only to its intended use, except to the extent the court determines that the value of the trust property exceeds the amount required for the intended use. Except as otherwise provided in the terms of the trust, property not required for the intended use must be distributed to the settlor, if then living, or otherwise to the settlor's successors in interest.

This brief overview of some important considerations associated with estate planning is by no means comprehensive. Always seek the advice of a competent professional when making important financial and legal decisions.

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