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Several
states have enacted statutes recognizing “valid”
pet trusts, as opposed to mere honorary trusts.
Eleven states (Alaska,
Arizona,
Colorado,
Hawaii,
Illinois,
Michigan,
Montana,
North Carolina,
Texas,
Rhode Island, and
Utah
have enacted the
1993 version of the Uniform Probate Code (UPC) §2-907.
Seventeen states have enacted the recently adopted a
version of
Uniform Trust Code (UTC)
§408 (Arkansas,
District
of Columbia,
Florida,
Kansas,
Maine,
Missouri,
Nebraska,
Nevada,
New Hampshire,
New Mexico,
Ohio,
Oregon,
Pennsylvania,
South Carolina,
Tennessee,
Virginia, and
Wyoming),
and the bar associations and legislatures in several
other states may soon be
considering enactment of the UTC. Six other states (Idaho,
Indiana,
Iowa,
New Jersey,
New York,
and
Washington)
have enacted independent pet trust statutes.
Nonetheless, in addition to the statutory provisions
discussed dealing with the duration of pet trusts and
the rule against perpetuities, the following is
a discussion of several common features to most (if
not all)
of these statutes:
1. If there is no caretaker-trustee willing or
able to serve, the court may appoint a successor.
The pet trust statutes expressly provide for the
appointment of an alternative caretaker-trustee in the
event that the settlor has not designated one.
However, the statute requires court action and does
not address the practical issue of who would be
willing to step forward to take on this role.
2. The terms of the pet trust and/or its
intended uses may be enforced against the
caretaker-trustee by any individual designated in the
instrument, or if none, by any individual appointed by
a court.
Of course, as discussed above, the pet trust statutes
do not address the issue of determining who may be
willing to take action against the
caretaker-trustee. This potential problem is
aggravated by use of the term “individual” (in some
statutes) to describe potential enforcers. In these
states, it would appear that the ability of a settlor
or a court to designate an animal welfare organization
to watch over a caretaker-trustee is restricted.
3. The court may reduce the amount of
caretaking funds initially passing to the pet trust if
it substantially exceeds the amount reasonably
required for the intended use.
The drafters of the pet trust statutes intended to
protect the human heirs from a presumably improvident
bequest to an animal. However, from another point of
view, this statutory provision gives any disgruntled
heir additional subject matter for litigation that
apparently cannot be drafted around.
4. Except as expressly provided in the terms
of the pet trust, no portion of the pet trust funds
may be used for any purpose other than the care of the
pet.
The pet trust statutes attempt to tie the hands of
the caretaker-trustee. That said, many
of these statutes appear to preclude the use of one
important incentive for ensuring that the
caretaker-trustee will take adequate care of the pet
- the payment of reasonable compensation. In
this regard, only the statutes in three states (Colorado,
Oregon, and
Washington) expressly
address the issue of caretaker-trustee compensation. Therefore, if the settlor intends to allow for compensation, an express
provision must be included in the terms of the pet
trust.
5. Except as required by a court or the terms
of the pet trust, the caretaker-trustee is excused
from making filings, reports, registration, periodic
accountings, separate maintenance of funds,
appointments, or fees normally associated with a
fiduciary relationship.
The pet trust statutes place more trust in the
caretaker-trustee than a trustee of a traditional
trust, perhaps based on the assumption that pet trusts
will be modest in amount and should not be burdened
with the expense of meeting such duties. Nonetheless,
whether this statutory relief is appropriate depends
on the settlor’s intent – i.e., how much the settlor
trusts the designated caretaker-trustee.
6. Except as expressly provided in the terms
of the pet trust, any assets remaining after
termination of the trust are to pass to the
beneficiaries of the estate of the settlor.
As noted above, this provision gives disgruntled heirs
an opportunity and standing to reduce the amount passing to the pet
trust and make any other challenges to the trust. To
close this door to litigation, the settlor should
consider expressly designating a remainder beneficiary
of the pet trust with interests that would not be
adverse to expending monies for the care of the pet,
such as an appropriate nonprofit organization.
7. Instruments are to be liberally construed
to find a valid pet trust, as opposed to an honorary
trust or precatory language.
One of the primary purposes of these statutes is to
bring poorly-drafted bequests within the statutory pet
trust regime based on the rebuttable presumption that
the settlor’s primary intent in gifting the pet
and any funds to an individual is to provide for the
care of the animal. UPC §2-907, as well as
statutes in several other states, go so far as to
render extrinsic evidence admissible to determine the
settlor’s intent.
What this means is that if the pet owner intends to
make an outright bequest of a pet and a sum of money
to a beneficiary within a jurisdiction that has a pet
trust statute, then the provision should expressly
state that a statutory pet trust is not
intended.
Even in
the jurisdictions with the most elaborate and
contemplative statutes, the statutory pet trust
schemes leave several issues unaddressed.
Specifically, the drafter should consider the
following:
·
Who owns the pet?
The pet trust statutes do not address the question of
who owns the pet – the caretaker as trustee or
the caretaker as beneficiary? This ambiguity
could create sticky legal issues if the need arises
for a third party to take physical possession and
custody of the pet away from the designated
caretaker-beneficiary.
(The
sample language for
a statutory pet trust included in this web site makes
the transfer of the pet to the trustee explicit.)
· How much money can be transferred to the pet trust?
Under most of the pet trust statutes, the courts are
authorized to reduce the amount of the property
transferred if its determines that amount
substantially exceeds the amount required for the
intended use, and the amount of this reduction, if
any, passes in the same manner as if the pet trust
terminated. As noted above, if disgruntled
beneficiaries (who could be heirs) and the court do
not agree that the pet should have as high a standard
of living as the settlor, then the amount passing to
the pet trust may be reduced. The drafter should
be cognizant of this possibility and the potential for
litigation by disgruntled heirs and, if advisable,
insert a clause providing that if a court determines
that the designated amount is too much, then the
excess will be distributed such that the challenging
parties would not benefit (e.g., to a nonprofit
organization). (See the
sample language
for such a provision.)
·
Can the statutory pet trust be enforced if the
caretaker-trustee moves into a jurisdiction that does
not recognize such trusts?
This is a question that deals with the complex issues
of conflict of laws and trust situs. Without going
into the potential outcomes in detail, it should be
noted that the
sample language for a statutory pet trust includes a
governing law provision and a provision
expressly stating that by accepting the benefits, the
caretaker-beneficiary consents to the application of
the desirable pet trust statute regardless of the
trust situs.
The
statutory pet trust statutes are intended to make the
best of a poorly-drafted instrument. As such,
relying upon these statutes in creating well-drafted
documents may not be the best course of action under
the circumstances.
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