Archives for October 2024

Pets create certain distinct challenges with respect to estate planning. At its core, the issue is that pets, legally speaking, are property.

In your mind, your beloved terrier Marty is a member of the family. But as far as the law is concerned, Marty is no different from a piece of furniture. Marty cannot own property. Marty cannot be named as a beneficiary. If no specific provision is made in your will, Marty will go to your remainder beneficiary. If there are multiple remainder beneficiaries, the executor will have to choose to whom Marty will go.

Option 1:  Your Will

One option is, in your will, to specifically leave your pet to a named beneficiary as well as leaving a specific amount of assets to that beneficiary for the care of your pet. That’s an easy solution but not a perfect one, because there’s no requirement that the assets be used to care for the pet. There’s no requirement that the beneficiary not get rid of the pet.

And a will doesn’t kick in until you die, so it provides no assistance in a case in which you become incapacitated and can no longer care for your pet.

Option 2: Pet Trust

Another option is to create a pet trust. (Here’s a refresher on basic trust terminology in case that’s helpful.) The pet, as well as a certain amount of assets, are left to the trust. And the trustee is required to manage and use the assets in keeping with the terms of the trust — one requirement of which could be that the assets be used for the care of the pet.

In addition, a pet trust allows you to name somebody to be the pet guardian, which is the person tasked with providing the actual care to your pet (while the trustee would be the person tasked with managing the assets).

And finally a beneficiary (or multiple beneficiaries) would be named, to whom the assets would be distributed after the death of the pet.

You can name separate people for each of the three roles: trustee, pet guardian, and beneficiary. Or one person can be named to fill two or even all three of those roles.

A trust also has the benefit of being applicable in situations in which you become incapacitated, if you choose to have the trust drafted that way.

This all sounds lovely, and indeed, a pet trust may be the best solution, but remember that trusts can be complicated entities. And pet trusts especially are unique little creatures.

Option 3: Pet Protection Agreement

A pet protection agreement is a legally enforceable agreement between a pet owner and a named pet guardian. The guardian agrees to care for the pet under certain circumstances, such as the death or incapacitation of the pet owner. The pet owner may provide funds as a part of the pet protection agreement, but it is not mandatory. The pet protection agreement generally includes instructions as to the pet’s daily care as well.

A pet protection agreement may be simpler than a pet trust, and it may allow you to achieve all of the desired goals. On the other hand, a pet trust can allow for a greater level of control.

Finally, I just want to note that whenever I discuss estate planning, I encourage people to consult with an estate planning attorney licensed in their own state, and this sub-topic (i.e., the tricky circumstance of dealing with a pet) is no exception. And to be clear, this is not just a legalese “CYA” sort of disclaimer. I really, sincerely mean it. Estate planning is complicated, and the rules vary meaningfully from one state to another. Guidance from an experienced professional is valuable.

Among people who read personal finance books, many save a high percentage of their income through most of their careers. One thing that eventually happens for some such people is that they reach a point at which they realize they have not only saved "enough," they have saved "more than enough." Their desired standard of living in retirement is well secured, and it’s likely that a major part of the portfolio is eventually going to be left to loved ones and/or charity. And that realization raises a whole list of new questions and concerns.

This book’s goal is to help you answer those questions.