Don't let it get away!
Keep track of the stocks that matter to you.
Help yourself with the Fool's FREE and easy new watchlist service today.
People care a lot about their pets. From making sure their pets have the best food to the latest in cat condos and doggie doors, pet owners want to do everything they can to make their animals comfortable and happy.
Yet pet care and retailing have become big business for companies like PetSmart (Nasdaq: PETM ) . This big-box merchant invites owners to bring their pets into the store, which then become social meeting places for owners and animals alike. Meanwhile, mail-order businesses like Petmed Express (Nasdaq: PETS ) also run their business trying to make sure your animals get the medical prescriptions they need to live long and happy lives.
Pets become part of the family. So it only makes sense that many owners want to make sure that when they die, their pets will still have someone to take care of them. You might think finding someone would be easy, yet animal shelters often end up being the caretaker of last resort for such pets.
Even if owners find a caretaker, it's hard for pets to form relationships with new owners, especially if the pets have been with their original owner for a long time. Yet for the new owner, the adjustment is only part of the problem. Caring for pets can be expensive, so conscientious pet owners may also want to leave behind some money to help the new caretaker cover expenses.
The idea of leaving money in a trust specifically created to cover such expenses is an attractive solution. But until recently, so-called pet trusts didn't pass legal muster.
Animals versus the law
The traditional problem with trying to set up a trust for an animal was that the law had a problem with a trust lacking a human beneficiary. Most laws governing trusts give trust beneficiaries significant rights, including the right to monitor and challenge the actions of trustees if the trustees do not act in the best interest of the beneficiaries. With pet beneficiaries, however, there isn't anyone who can provide the traditional checks and balances against the powers of the trustees; therefore, trustees could potentially spend all of the trust's assets on themselves and neglect the welfare of the pet beneficiaries entirely. Since public policy tries to avoid encouraging people to take actions that allow abuse, most courts tended to conclude that pet trusts were entirely invalid.
Lacking explicit statutory support, some courts tried to use the common-law concept of the honorary trusts to allow for the care of pets. Honorary trusts are so named because the beneficiary has no ability to enforce the terms of the trust, and trustees are bound by their honor to follow the instructions set forth in the trust document. Although such trusts provided a way for pet owners to get their foot in the door, it didn't give them certainty that their pets would get the care they needed.
New solutions for pet care
More recently, however, many states have established new laws that try to address the traditional problems in setting up trusts for pets. The Uniform Trust Code, which many states use as a model for the laws they enact, now includes a section that sets forth a procedure for creating a pet trust. Under this provision, pet owners can create trusts for their pets for the specific purpose of caring for any animal that is alive at the time the trust is created. The trust can last as long as any named animal beneficiary is still alive while assets remain in the trust.
To solve the question of enforcement of the trust's instructions, the provision allows pet owners to name someone other than the trustee to make sure the trustee is following the original owners' instructions. If the owners fail to name someone, or if the named person is unable to serve, then anyone who has an interest in the animal's welfare can petition the court to name someone to enforce the trust's terms.
If any trust assets remain after the pet dies, the trust usually instructs the trustees to distribute the remaining money to the person or organization named in the trust or to the heirs of the original owners. Since pet owners who are dedicated enough to their animals to set up trusts for them are usually pretty devoted to the cause of animal care, many owners name local humane societies or other pet-related charities as the recipients of any leftover funds.
To take advantage of these statutes, you still have to make sure you have a legally binding trust document in place. To make sure everything is set up correctly, try to find an attorney who's willing to donate some time toward instructing you on the correct language to include in the trust. In addition, organizations such as the Estate Planning for Pets Foundation have many helpful resources for pet owners, including a list of attorneys willing to take them seriously and provide good advice.
The idea of trust-fund puppies or kittens may seem amusing to many, but for devoted pet owners, nothing is more important than the welfare of their animals. By setting aside money in a pet trust, you can make sure your loved ones are given the same level of care you would give them after you're gone.
For more Foolishness: