Pets have become an increasingly important part of modern life. Many pet owners view their animal companions as members of the family and treat them as such, but it has only been in the last few decades that pets were given a legal upgraded status. It was 1993 when the National Conference of Commissioners on Uniform State Laws and the American Bar Association added Section 2-907 of the Uniform Probate Code to the books. Previous to this the law treated pets like any other piece of property upon the death of their owners. In this article, we'll show you how to set up a trust for your pets, so that when you pass on, they will still be able to have a full life.

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With the adoption of this code, setting up a trust to care for pets became a recognized estate planning technique. Today, the majority of states recognize some form of planning for pets, and more than three dozen states currently have laws on the books about pet trusts. These laws enable pets to become the beneficiaries of your will. (To read more about this topic, see Update Your Beneficiaries, Getting Started On Your Estate Plan and Establishing A Revocable Living Trust.)

How It Works
The specifics of the law vary from state to state, but the two basic types of pet trusts include testamentary, which is designed to provide care after the owner's death, and inter vivos, which provides care when the owner is still living but no longer able to care for the animal. Inter vivos trusts can be useful if the owner is incapacitated or living in an assisted-living facility.

In both cases, a caretaker is assigned to address the animal's needs and a separate trustee is assigned to ensure that the caretaker is doing his or her job. The two greatest challenges with pet trusts are greedy relatives and a provision known as "the rule of perpetuity." The greedy relatives come into play when a pet trust is challenged in court. Since pets can't speak for themselves, but your relatives can hire a silver-tongued lawyer and shop for a sympathetic judge, pet trusts are often significantly reduced when the court is petitioned to view your bequest as "over-funding." If the judge rules that your pet-care fund is more than reasonable, that $500,000 that you left behind to care for Fluffy could get chopped down to $25,000, and your least favorite nephew could receive a windfall.

Beating Greed to Protect Your Pet
To get around the greed, there are three primary options. The first is to contact a pet retirement home and fully fund your pet's care while you are still living. Some pet retirement homes, such as the Stevenson Companion Animal Life Care Center at Texas A&M University College of Veterinary Medicine, are associated with universities. Others are run by private enterprises.

Another way to keep your pet out of court is to limit the size of your bequest to something on the order of a few thousand dollars per year for each year of the pet's remaining lifespan. If you have multiple pets, a creative way to address the challenge of keeping them together and cared for in the manner of your choosing is to include real estate as part of the trust. The designated caretaker lives rent free as long as he or she cares for the animals. (To learn more about investing in real estate, see Smart Real Estate Transactions, Investing In Real Estate and Exploring Real Estate Investments.)

A third option is skip the trust altogether and donate your estate to a local animal care sanctuary with the stipulation that your pet receive care for the remainder of its life. To learn more about animal sanctuaries, check out companion animals section of The Association of Sanctuaries' website.

Beating Perpetuity Rules to Provide for Your Pet
The other major challenge to pet trusts is the rule of perpetuity. Under this rule, a trust becomes invalid 21 years after the death of the person that set up the trust. This can be problematic when seeking to provide for the care of long-lived pets, such as birds and horses. A dozen states have enacted the Uniform Trust Act, which provides for animal care for the lifespan of the animal, but this issue remains contentious in most states.

Why Planning Is Important
Pets become accustomed to the lifestyle they enjoy with their owners. Like people, they develop a routine, which may include daily walks, medication, special living accommodations and a preference for certain foods. Unfortunately, the death of the pet's owner often leads to the pet being dropped off at an animal shelter.

The Bottom Line
If you have living relatives, they can be the perfect option to be entrusted with your pets. Remember though, pet care is expensive. A pet trust will give your relatives or other caretaker the means to provide for your animals in a manner consistent with your wishes. To fund such desires, some people have designated their pets as the beneficiaries of substantial life insurance policies. Whatever path you choose, with a little careful planning, your pets will have the opportunity to live out their lives in the comfort to which they have become accustomed.

To keep reading on this subject, see Why You Should Draft A Will, The Economics Of Pet Ownership and Protect Your Kids And Pets With Custom Insurance.

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