Pet Trust Funding – How Much Is Enough?
By Laura J. Martin, Esq.
A “Pet Trust” is a statutorily enforceable trust relationship for the care of one or more animals. If you die or become permanently unable to care for your animals, a Pet Trust can be used to provide for and protect your animals throughout their remaining lifetimes. A Pet Trust is the most protective estate-planning option available for pets. However, if a Pet Trust runs out of money, it provides no protection at all! Providing for the future care of an animal in trust is more complex and more expensive than simply giving the animal and money for its care to another person.
Determining how much to set aside to cover the costs of future pet care and trust administration is one of the most challenging aspects of Pet Trust planning. Unfortunately, many Pet Trusts are underfunded. While there are no concrete rules to Pet Trust funding, there is a list of factors you can use to help you determine how much is enough: (1) your annual costs of animal care, (2) the probable life expectancy of your animals, (3) costs of property maintenance and significant purchases, (4) routine trust administration costs, and (5) any unusual or extraordinary animal care or trust administration costs.
Annual Costs of Animal Care:
A crucial first step is to determine the annual costs of caring for your pet and maintaining the pet’s current lifestyle. These costs include:
food, feed, supplements, and treats
bedding, equipment, and supplies
toys and enrichment activities
routine, non-routine, and emergency veterinary treatment
alternative healthcare
housing, boarding, and in-home care
grooming and farrier or hoof care (for hooved animals)
exercise, dog walkers, or day care
training and instruction
transportation, and more
Remember to consider the impact of inflation on future annual animal care costs. At our current inflation rate of 2.7%, if you spend $5,000.00 on animal care this year, that same level of care will cost $8,518.81 twenty years from now.
Probable Animal Life Expectancy:
The next step is to consider your pet’s probable life expectancy. The life expectancy of an individual animal depends on many factors, including its current age, species, breed, size, body type, genetics, health, diet, lifestyle, and the quality of care received in the past and future. Individual animals may live way beyond what is considered typical for their species or breed. Estimating life expectancy is not an exact science – an educated guess is still a guess. Consider erring on the side of caution by providing funding for a few extra years beyond typical life expectancy.
Property Maintenance and Significant Purchases:
If your animals will continue living in your home or on your property after you pass, you will also need to set aside funds to maintain and improve the property throughout the animals’ lifetimes. Similarly, if the Pet Trust will be used to pay for significant purchases, such as fencing to keep your animal safely contained, or a vehicle or trailer for transportation, sufficient funds must be set aside to cover the initial purchase and maintenance costs.
Routine Trust Administration Costs:
The annual costs of administering a Pet Trust can vary widely depending on the structure and complexity of the trust. While the costs of administering very simple Pet Trust may be minimal, the costs of administering a complex Pet Trust with multiple fiduciaries (pet caregiver, trustee, trust enforcer) and significant monitoring and oversight requirements may exceed the direct animal care expenses many times over. Pet Trusts can be used to provide multiple layers of protection for animals, but each layer of protection comes with a price tag. Routine Pet Trust administration costs may include:
compensating the pet caregiver, trustee and trust enforcer
professional advisors and services (attorneys, accountants, financial advisors)
income taxes
insurance premiums (property, liability, animal health or mortality)
monitoring, reporting, paperwork, mailing, and other expenses
The more complex the Pet Trust, the more it will cost to administer the trust on an annual basis. If there are limits on money or property you have available to fund a Pet Trust, a simpler trust structure may be more practical. A complex Pet Trust with multiple fiduciaries and tiers of checks and balances won’t provide any protection for your animals if it runs out of money.
Extraordinary Future Expenses:
Lastly, we need to provide for the possibility of unusual or extraordinary future expenses that could deplete Pet Trust resources. Your pet could develop a costly chronic health condition or need expensive emergency veterinary treatment. Your animal could cause significant damage to a caregiver’s property or could hurt someone. Litigation may be necessary to defend a Pet Trust against disgruntled family members or enforce the trust and its terms for your pet. While litigation is rare, one of the primary advantages of a Pet Trust is the ability to enforce the trust for the benefit of an animal if needed. Ideally, a Pet Trust should be sufficiently funded to cover the potential costs of:
emergency or acute veterinary treatment
treatment of future chronic health conditions
the costs of veterinary specialists
repairs and damages
trust enforcement or other litigation
other unbudgeted expenses
Considering all the factors discussed above will reduce the risk of an underfunded Pet Trust and ensure that sufficient funds are available to care for your pets throughout their lifetimes. An experienced Pet Planning attorney can assist you with determining the funding that is appropriate for your individual circumstances and Pet Trust terms.
The next OAA Animal Insider newsletter will contain the final article in the Pet Planning series. We will complete this article series by reviewing and summarizing our Pet Planning objectives and the tools and solutions available to plan, provide for, and protect both pets and their people.
This is the eleventh article in the OAA Animal Insider newsletter continuing series about Pet Planning. Additional information about Pet Planning and the planning options available to you is included in the Introduction to “Pet Planning” for Animal Owners guide.
Disclaimer: This information is provided for educational purposes only and is not legal advice. For Pet Planning assistance, please consult with an experienced estate planning attorney
