On October 1, Maryland became the 40th state to permit the establishment of a pet trust. Previously, Maryland pets had no legal rights regarding assets left by their owners for their care. Owners had to rely upon another human to hold title to the pet’s assets and care for the pet. The available planning options provided owners with limited peace of mind that their pets would receive proper care after the owners’ demise.
Pet Trust Statutory Framework
The new Pet Trust Statute closely tracks the language of Section 408 of the Uniform Trust Code (UTC). Maryland Courts have not interpreted the Pet Trust Statute. This article assumes that Maryland Courts will adopt the official comments to the UTC.
A pet trust can be established during the owner’s lifetime or as a testamentary trust created under an owner’s will. The Pet Trust Statute permits a pet trust to provide for the care of multiple animals that are alive during the lifetime of the owner. A pet’s offspring conceived after the death of the owner will not qualify as beneficiaries. A pet trust must terminate upon the death of the last animal beneficiary of the trust.
After termination, the trust’s assets are distributed to the individual’s/entity(ies) designated in the trust. If no such designation is made, the assets are distributed to the residuary legatees under the owner’s will, or, if there is no will, to the owner’s heirs at law.
A person appointed in a pet trust may enforce the trust. If no one is appointed, a court may appoint someone to enforce the trust. After an “enforcer’s” appointment, someone with an interest in the welfare of the pet may request a Court to enforce the trust or to remove the “enforcer”. The UTC indicates that a “person having an interest in the welfare” of the pet should have previously exhibited or demonstrated such interest with respect to the pet.
Statute permits an owner to pamper a pet, but not to spoil the pet rotten.
The Pet Trust Statute permits an owner to pamper a pet, but not to spoil the pet rotten. If a Court determines that the value of a pet trust exceeds the amount required for its intended use (e.g. the Leona Helmsley $12 million situation), the Court shall order the excess assets distributed to those people designated in the trust. If no such designation exists, the assets are distributed to the owner, if living, or to the residuary beneficiaries/heirs at law of the owner’s estate.
Pet owners who leave money for their pets are like everyone else – they do not want to pay more than their fair share of taxes. Attorneys should be aware of the various income, trust, estate, gift and inheritance tax consequences of pet trusts, as well as other methods of transferring pet ownership (a detailed discussion of each is beyond this article’s scope).
Post Mortem Pet Care Planning
Whether a formal pet trust is established or a pet is simply left outright to a trusted friend, the pet first must be identified so another animal cannot be substituted. (Microchipping the pet is a common technique.)
The owner should select the pet’s primary and back-up caregiver. The caregiver will be the pet’s new custodian, responsible for the day-to-day care, and also will have standing to enforce the terms of any trust.
If a trust is used, a trustee and successor trustee should be named. The trustee should be someone who can oversee the financial aspect of the pet’s care. The owner should include detailed directions to the trustee and/or caregiver regarding the expected level of care.
The trustee and the caregiver may be the same or different individual(s). An owner may consider requiring the trustee or the trustee’s designee (e.g. a veterinarian) to meet with the caregiver and pet at least once per year.
The owner should determine the appropriate amount and method of financial remuneration to pay the caregiver/trustee, and direct where any excess money should go upon the death of the pet.
Along with post mortem planning, consideration should be given to the care of a pet if the owner becomes incapacitated. This situation can be addressed through written instructions given to a financial power of attorney that are only to be acted on upon the occurrence of specified events.
Although the Pet Trust Statute is not the only estate planning option for pets, it underscores the importance of considering pets in estate planning. It also provides owners with peace of mind by establishing rights for pets.
Robert M Horne is an associate and Yale M. Ginsburg is a member with Adelberg, Rudow, Dorf & Hendler, LLC. Horne focuses his practice in estate planning and administration, and general business law. Ginsburg concentrates his practice in estate planning and administration, and general tax planning.