A CPA’s Insight to Estate Planning for Your Pets

As a CPA, one common estate planning question I get from clients is, “Can I leave money or assets to care for my pet when I’m gone?”

The short answer is yes, you can make arrangements to provide funds and instructions for your pet’s continued care and well-being. However, there are right and wrong ways to go about this depending on your state laws and personal situation. Proper planning is crucial if you want to ensure your beloved companion animals are provided for.

In this article, I’ll share key things CPAs and pet owners need to think through when establishing a pet trust or otherwise planning for pet care in an estate.

The Legal Aspects of Estate Planning

Can you actually leave money to a pet? Unlike human beneficiaries, pets are legally considered property. So, you cannot name your pet directly as a beneficiary in your will or designate them as an heir.

However, you can direct in your will or in a separate pet trust that funds should be allocated specifically for pet care costs after you pass. This requires appointing a human trustee who will be legally responsible for managing the assets and making sure the money is used appropriately for your pets per your instructions.

I generally recommend setting up a standalone pet trust because it allows you to provide more detailed directions tailored to each animal’s needs. It also avoids conflicts with human beneficiaries who may dispute directing any funds towards pets.

It’s important to note that pet trust statutes vary by state and enforceability is still evolving. I advise every client work with an estate planning attorney to ensure their trust documents comply with all laws and account for contingencies like unused funds. There may also be limitations on how much money can go into pet trusts in certain states.

Choosing a Trustee and Guardian

Your pet trust is only as reliable as the trustee and pet guardian you designate. These individuals play the most critical roles in carrying out your wishes, so selection is important.

Pet Trustee

The trustee assumes legal responsibility for managing trust property and funds in the interest of your pet per the document directions. This involves tasks like:

  • Releasing funds to the guardian for pet expenses
  • Investing assets productively to grow the trust balance
  • Ensuring sufficient funds remain for future pet costs
  • Filing any required accountings/tax returns for the trust
  • Working with the guardian on budgeting, estate issues, etc.

Given these significant duties, it’s key to choose a trustee who is financially savvy, organized, reliable, and invested in your pet’s well-being. Family members or close friends who know your animals well are common choices. Consider naming a secondary trustee as backup, too.

Pet Guardian

Equally, if not more, important is selecting someone committed to assuming guardianship of your pets if you pass away before they do. This means providing daily care, managing expenses, and following your directions for each animal’s routine, housing, medical treatment, and so on.

Think seriously about family, friends, or associates who have met your pets and could provide a comfortable, stable environment. Consider factors like other pets in their home, work flexibility, lifestyle stability, and previous pet ownership experience.

Discuss the guardian role directly with candidates to set clear expectations. Delineate any costs the trust will cover and specific care duties required. Confirm they are willing and able to make this commitment for the remainder of each pet’s life.

Enforceable Pet Care Instructions

The crux of any pet trust is the detailed instructions you provide on how you want your pets cared for and funds allocated after you’re gone. To avoid any confusion or disputes, be as specific as possible about your wishes and expectations.

For each animal, outline their daily care regimen that cover:

  • Diet and nutrition instructions
  • Exercise routines
  • Enrichment/training activities
  • Grooming specifications
  • Boarding preferences
  • Housing accommodations
  • Interaction/supervision requirements
  • Medical directives

Provide direction if changes become necessary, for instance due to age, illness, or physical limitations. Be specific about which expenses the trust covers, like:

  • Food
  • Supplies/accessories
  • Housing
  • Medical/dental treatment
  • Grooming
  • Boarding
  • Medications
  • Alternative therapies
  • Final expenses

Outline any other specifications such as only allowing adoption to someone you know or euthanasia in extreme circumstances per your vet’s recommendation.

Covering all these bases ensures your pets enjoy as smooth a transition as possible into their new life in line with the care they are accustomed to.

Funding the Pet Trust

A common mistake I see is people allocating an arbitrary sum to their pet trust without considering actual lifetime costs. This leads to the trust being exhausted well before pets pass, leaving them abandoned or without care.

To determine funding needed, analyze:

  • Your pet’s expected age — consider breed, health, family history
  • Vet-recommended annual costs for pet’s age/size
  • Projected extraordinary expenses — medical, kennels, walkers, etc.
  • Total annual costs x expected remaining years = total funding needed

Also factor in some extra buffer for incidentals or increased future pet care costs due to inflation. Any unused funds at your pet’s passing can be directed towards a secondary beneficiary named in trust documents.

For multiple pets, determine costs individually, then total. This ensures each one has dedicated resources based on their expected lifespan and care needs.

I also recommend funding through assets that transfer directly to trusts tax-free upon death, like life insurance or payable-on-death accounts. This preserves more value without depletion through estate taxes or legal processes.

Ongoing Trust Administration

Proper trust administration is just as critical as the initial plan. The trustee and guardian should provide regular accountings back to successors you name to ensure funds are utilized appropriately. They should also monitor for any needed updates to the care instructions or funding as pets age.

At least annually, review the pet trust to see if provisions still sufficiently provide for the animals covered. Account for evolutions like new pets acquired, medical developments in current pets, the passing of covered pets, or guardian relationship changes.

Also analyze whether funding levels still adequately cover projected expenses. Health issues that arise or increased costs for things like pet food, kennels, and veterinary care might necessitate additional funds.

Think through secondary care options if a guardian can no longer fulfill their duties. And redirect final beneficiaries for any unused funds so nothing gets locked in probate.

By actively administrating the trust, you can continue to protect your pets even after you’re gone.

Estate Planning and Tax Considerations

There are a few key estate planning and tax nuances to consider with pet trusts I advise my clients on:

  • Gift tax implications — funding a pet trust may trigger gift tax if assets transferred exceed your lifetime exemption amount
  • Estate inclusion — the IRS may include pet trust assets in your gross taxable estate depending on how much control you retain
  • Impact on inheritance taxes — directing funds towards pets reduces what beneficiaries may inherit, which could increase their taxes

Certainly examine these issues with your accountant and attorney to minimize total taxes related to your entire integrated estate plan. Strategies like trust discounts, charitable remainder options, and pet trust insurance can help mitigate tax consequences.

The key is ensuring you don’t compromise resources available to responsibly care for pets or significantly shortchange other heirs. Seek solutions that balance priorities and share tax burdens equitably.

Alternative and Contingency Planning

It’s unfortunate, but sometimes the person you hoped would always care your beloved pet can’t continue doing so for one reason or another. That means realistically planning for what should happen when your designated caretaker can no longer care for your pet.

If no trusted family or friends can assume custody, consider:

  • Boarding at a reputable kennel, paying facility fees through trust distributions
  • Placing pets at a no-kill shelter with adoption provisioning
  • Transferring care to a pet retirement facility with fees funded
  • Naming a sanctuary as final beneficiary to accept pets

Make your final wishes clear in documents and prepay or arrange deposits when possible. This brings peace knowing your animals will be safe and cared for regardless of what contingencies arise.

Prepare Information on Care Needs

To further aid guardians and successors administering pet care, create information packets that include:

  • Medical/vaccination records
  • Microchip information
  • Prescription information
  • Insurance documents
  • Special diet/needs instructions
  • Known health issues
  • Typical routines/behavioral quirks
  • Favorite activities, toys

This allows your pet’s needs to continue being met seamlessly even by someone who hasn’t previously cared for them.

Communicate Your Intentions

If establishing a pet trust, inform key parties who will be involved with settling your estate, like executors, trustees, and beneficiaries. Confirm that they will work with you to achieve your goals. Then, after you complete the documents with your attorney and advisors, provide them copies of documents along with contact info for the guardians and other key individuals involved in the planning.


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