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June 8 — Pet lovers in all 50 states can now use trusts to pay for the care and maintenance of animals that survive their owners.
Minnesota became the last state to pass legislation on “pet trusts” when Gov. Mark Dayton (D) signed the pet trust legislation May 22 as part of the Revisor’s Omnibus technical corrections bill, Matt Swenson, press secretary and senior communications adviser in the governor's office, told Bloomberg BNA June 8.
Pet trusts provide a legally sanctioned arrangement whereby any money or property set aside in the trust for a pet is dedicated to the animal's care. After the animal dies, the remaining funds are distributed among other heirs or as directed by the trust or courts.
The Minnesota bill (H.F. 1372) stipulates that “[p]roperty of a trust authorized by this section may be applied only to the trust's intended use, except to the extent a court determines that the value of the trust property exceeds the amount required for the intended use.”
The animal must have been alive during the grantor's lifetime for the pet to benefit from the trust. The trust may be enforced by a person appointed in the trust terms or a court appointee. A person with an interest in the welfare of the animal may ask the court to appoint a person to enforce the trust or remove an appointed individual, the bill said.
Related legislation was introduced in Congress in May 2007.
The Charitable Remainder Pet Trust Act (H.R. 2491), sponsored by Rep. Earl Blumenauer (D-Ore.) and former Rep. Jim Ramstad (R-Minn.), was an attempt to revise the Internal Revenue Code to treat pet trusts in a manner similar to charitable remainder annuity trusts. The legislation would have allow estates and donors with CRATs that have a pet—or its guardian as a beneficiary—to receive a charitable deduction for the remainder interest when the trust is established.
“The bill provides a tax incentive for people to arrange for long-term care of their pets, which will result in a reduction of society's burden in caring for ‘unwanted' dogs and cats after the guardian dies,” Blumenauer said when introducing the bill.
Recognition of these trusts by the federal tax code would have enabled long-term pet care and encouraged people to engage in charitable giving, he said. At the same time, the legislation would have borne no cost to the federal government, he said.
A spokesman from Blumenauer's office said the legislation was referred to the House Ways and Means Committee—of which Blumenauer is currently a member—but was never brought up for a vote.
In June 2014, a decision was reached in a legal case where Richard Copland, co-executor of an estate, petitioned the Westchester County Surrogate's Court in New York for a decree reducing the amount of money to be transferred from the estate to the trustees of a pet trust established under a decedent's will ( Matter of Copland, 2014 BL 182099, Sur. Ct., No 2007-515/A, 6/27/14 ).
In February 2003, the decedent, Lenore Abels, executed an instrument that provided $115,000 in cash bequests to various charities for the care of animals and the rest of her assets in trust for her husband. If her husband didn't survive her, all of her property—with the exception of the home—was to be sold and distributed to her named trustees.
The assets were to be used as follows: $35,000 in salary and a $5,000 bonus per year to her housekeeper and extra funding for the housekeeper to maintain the home and care for her cats. When the last cat died, the home and its contents were to be sold, and the remainder assets distributed to 33 animal-oriented charities in the percentages set forth in the instrument, plus a $50,000 bonus to the housekeeper.
In 2007, the decedent died 16 days after her husband. An inventory filed in 2007 reflected assets in the decedent's estate totaling $4.76 million. Copland filed an amended petition requesting that the court reduce the amount to be transferred to the trustees to either $440,000 or $1 million minus $628,000—the amount already expended—for a total of $372,000, in addition to permitting the sale of the decedent's home.
He said that the co-executors had been fulfilling the terms of the trust with estate funds because funds had never been transferred to the trust for the life beneficiaries. He also noted that the decedent's two cats, Gindy and Poke-A-Dot, were expected to live another five to 11 years and three to nine years, respectively.
Copland said that the decedent's home needed significant repairs, that the taxes and upkeep on the home were expensive, and that the housekeeper was willing to leave the home and have the co-executors find and pay for a suitable new place for her and the cats to live.
However, because the decedent gave very specific instructions as to how she wanted her cats to be cared for and the petition was in opposition to her wishes, the court denied the reduction.
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Text of the 2014 decision is at http://www.bloomberglaw.com/public/document/Matter_of_Copland_44_Misc_3d_485_988_NYS2d_458_Sur_Ct_2014_Court_.
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