Nowadays, people consider their pets to be members of the family.
And while no one likes to think about it, when family members depend on you, you need to think about how to provide for them when you're no longer around.
Unlike human relatives, however, you can't just draft a will and leave money directly to your pet. The law considers animals to be property—a fact that may make pet lovers indignant.
But, honestly, think about what would happen if you left your dog or cat a pile of cash, says lawyer Rachel Hirschfeld, a pet trust expert and author of "Petriarch: The Complete Guide to Financial and Legal Planning for a Pet’s Continued Care." "You leave money to your pet. When he needs care, your pet picks up the phone, calls the vet and explains his needs," she says. "Then he calls a taxi or gets in the car and drives himself over ..."
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Not gonna work, right?
Enter the pet trust, which not only lets you designate a caretaker for your critter, but it also allows you to set aside funds for your pet's care. The idea has been gaining serious ground since 2000, when the Uniform Trust Code extended to statutory pet trusts, inspiring most states to authorize pet trusts.
Want to set up a trust for your own beloved Fido or Fifi? Read on for everything you need to know when it comes to planning for your pet's future.
The 101 on Pet Trusts
Legally, there are a few ways to set up a pet trust. Option one is to have a lawyer draw up a free-standing trust, but Hirschfeld cautions that it's important to hire an attorney who has specific experience with pets. "These are not documents that have been around a long time," she says.
Another option that will give you the same legal protection is a Pet Protection Agreement. It's endorsed by the ASPCA, and you can purchase it inexpensively online and prepare it yourself without a lawyer. "The Pet Protection Agreement is a combination of the best of wills, trusts and contracts," Hirschfeld says. "A good pet trust should also be all those things."
An important benefit of both approaches is that they can't be contested after your death. "A free-standing pet trust isn't probated through the courts," Hirschfeld says. But with a will, anyone can legally object to its provisions, rendering a judge to make the final decision—and not necessarily the way you would have preferred.
Also, unlike a will, both a pet trust and a Pet Protection Agreement can take effect if you are incapacitated during your lifetime. The designated guardian can have temporary ownership of the pet, but as soon as the person recovers, the animal automatically returns to the owner.
A Matter of How Much Money to Leave
Since pets are legally considered property, there's one more route that you can take: Leave the animal to someone, along with money for their care. That's what Ellen Derrick, a certified financial planner™ with LearnVest Planning Services, is doing for her three miniature schnauzers.
"I have several good friends who have dogs," Derrick says. "With one friend, in particular, we're each other's go-to person—we have regular conversations about what would happen if we weren't here."
Although Derrick is leaving money for her friend with no legal strings attached, she's confident in her decision: Her friend knows the dogs well, and how Derrick prefers to care for them—and Derrick trusts the friend to do the same. "And if she weren't able to, she'd go to the same measures I would to find them new homes," Derrick says.
"We're not talking about leaving $450,000 to Fluffy and $50,000 to your son. But people tend to really underestimate how much they spend on pets."
However, since wills can be contested, Derrick notes that it's important to leave a reasonable amount of money relative to your total estate. "We're not talking about leaving $450,000 to Fluffy and $50,000 to your son," she says. "But people tend to really underestimate how much they spend on pets. If you don't know how much you pay at the vet, call your vet. Even if you don't have records, they will."
Derrick adds that you need to think about all of your pet expenses, including boarding—your pet's new guardian will probably want to go on vacation at some point—and don't forget to think about end-of-life care. "We lost one of our dogs in December to cancer," she says. "It was a several-months-long routine of taking him in for tests ... and it got really expensive."
If the amount you want to leave exceeds what you normally have in your bank account, you probably don't want the guardian to have to wait a year for your house to be sold. "So think about what you have that's liquid, which could be converted to cash," Derrick says.
And regardless of the legal route you choose or the ultimate numbers, put it in writing. You owe it to your pets—and the people you leave behind. As Derrick says, "You don't want to leave them guessing about what your wishes were."