Our pets give us years of unconditional love, comfort, and enjoyment in exchange for food, shelter, and our loving attention. But who will care for them when we’re gone? Including your pets in your estate plan can solve this dilemma.
According to the Insurance Information Institute, nearly 68 percent of American households own a pet. Chances are your home is one of them. Pets are often considered members of the family and are treated as such. So it just makes sense to provide for their care after you’re gone.
There are two ways to include your pet(s) in your estate plan. One is relatively simple to do while the other is more complex. Your financial situation and your personal preference may influence your choice.
Including Pets in Your Will
One of the simplest ways to ensure that your pets receive care after your death is to include them in your last will and testament. You may choose to name an individual or an organization to be your pet’s caregiver. If it is an individual, it is wise to have a conversation with him or her to confirm their willingness to take on the responsibility.
In addition to naming a caregiver, you can include a one-time distribution of funds in your will to cover initial costs of accommodation for the pet, e.g. fence for yard, or other expenses. If you do this, it is important that you have confidence that the caregiver will spend the funds wisely.
Naming a caregiver in your will is probably the most efficient way to incorporate your pet into your estate plan. This strategy works best if you have a family member or friend who is willing to provide care and has the financial ability to support them on an ongoing basis.
Note that your will can name a caregiver for your pet, but it can’t provide on-going funding over your pet’s lifetime. For that, you’ll need to set up a pet trust.
Establishing a Pet Trust
If the ideal caregiver for your pet doesn’t have the finances to provide ongoing care, you can establish a trust. A trust names a trustee (individual who manages the assets in the trust) and a beneficiary. The caregiver is typically the beneficiary, since your pet can’t physically receive funds. The trust document should also include instructions for your pet’s care.
How much money should you allocate to your pet trust? That’s not a simple question to answer. It depends on a variety of factors such as number of pets, their ages, as well as the cost of veterinary care and routine upkeep. Estate planning experts recommend keeping your pet trust funds at a reasonable level. Why? In the past, pet trusts containing large sums of money have been contested by family members of the deceased.
A benefit of establishing a trust during your lifetime is to provide for your pet(s) if you become incapacitated. Unlike a will, which goes into effect only if you are deceased, a trust can take action if you’re incapacitated and unable to provide care for your pet(s).
As with a traditional trust, a pet trust must name an ultimate beneficiary. The ultimate beneficiary is the person(s) or charity that will receive the balance of trust funds once your pet(s) passes away. Estate planning experts recommend naming an ultimate beneficiary that is separate from the caregiver so there’s no conflict of interest. It might be tempting for the caregiver to be stingy with the funds you’ve set aside for your pet if he or she will receive the remainder when they’re gone.
Naming a pet caregiver in your last will and testament and establishing a pet trust are two ways to provide care for your pets once you’re gone. Remember to include language in your documents for current as well as future pets. Taking these steps now can ensure your pets continue to receive the care and love you desire for them.
Abby VanDerHeyden, CFP, is a Financial Planner with Bedel Financial Consulting Inc., a wealth management firm located in Indianapolis. For more information, visit their website at bedelfinancial.com or email Abby.