JMBM Tax Newsletter: California's New Law for Pet Trusts

Who Will Care for My Pets When I’m Not Around? This is a question all pet owners consider from time to time. The elderly can be especially reluctant to welcome a new pet into their lives for fear that the pet will outlive them. This is unfortunate in view of recent studies confirming what pet owners already know — that companion animals make excellent company and generally improve the quality of life of the people who live with them.

How do the Recent Changes to California Law Affect Me? The new law allows you to create enforceable trusts for the benefit of your pet(s), by providing that “a trust for the care of an animal is a trust for a lawful noncharitable purpose.” (California Probate Code 15212, added to California law effective January 1, 2009) Under prior law, only “honorary” trusts could be created for animals, leaving the "human" beneficiaries of the trust to decide whether (and how) to use the funds entrusted to them to care for the animals. Under the new law, the trust purpose is enforceable by persons named in the trust, as well as by “any person interested in the welfare of the animal” and by certain charitable organizations.

What Terms Should Be Included in the Trust Document? The trust agreement must include, at a minimum, the following specific information:

  • the amount of money (or other property) which will be allocated to
  • fund the trust,
  • what animals are to be cared for,
  • who is designated to act as trustee, and
  • who will receive the funds remaining after all of the animals have died.

The specific terms of any given “pet trust” should be determined based on a number of factors, including:

  • the size of the trustor’s estate,
  • the type and number of animals to be cared for (including their
    expected lifespans),
  • whether the trustor wishes to have his or her home maintained as the pet’s residence after the trustor’s death, and
  • the lifestyle the trustor wishes to maintain for the animal beneficiaries.

You should give serious thought to choosing the persons who will be responsible for caring for your pets. In addition to the trustee — the person charged with determining the use of the funds held in trust for your pets — you may wish to name a specific caregiver who will handle the daily care of your pets. You may also wish to name a pet committee composed of individuals such as the pets’ regular veterinarian, and other individuals who have special relationships with your pets but are unable to provide them with daily care. The trust should also give certain individuals or organizations the power (and responsibility) to periodically inspect the pets themselves, the place where the pets are being cared for, and how the trust funds are being used.

Should I Include Specific Care Instructions? A separate written set of “Care Instructions” may be prepared as an exhibit to the Pet Trust. This can be as detailed as you wish, including what foods your pet should be fed, how often regular veterinary visits should be made, how often and for how long the pet should be exercised/walked, etc.

Do I Need To Prepare a Separate Trust? A “pet trust” can be drafted as a separate trust agreement, or as a new article added as an amendment to an existing living trust. You should have a discussion with your estate planning counsel about how best to incorporate a pet trust into your current estate plan.

Do I Need to Amend the Trust Whenever a Pet Dies, or When I Acquire a New Animal? Flexibility should be built into the trust documents so that your pets who are living at the time of your death will be cared for pursuant to the trust provisions. Changes related to the identification and special needs of particular pets should be made to the Care Instructions, which may be modified without the formalities of amending the trust. If you wish to make changes significant enough to justify increasing (or decreasing) the funds allocable to the pet trust, a simple amendment to the trust may be appropriate.

Wendy Bleiman is an associate in the Taxation Group at Jeffer, Mangels, Butler & Marmaro LLP. Her tax planning and controversy practice included areas of federal income taxation of domestic and international transactions and entities, partnership taxation, tax-exempt entity regulation, corporate taxation, tax controversy, state franchise and income tax law, multi-state tax issues, California property tax issues, and sales tax issues and audits. For more information, please contact Wendy at 310.201.3584 or WBleiman@JMBM.com.