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There are several legal issues that must be considered
in drafting a trust intended to benefit of a
companion animal.
The following is a general discussion of the two
problems most often associated with attempts to
establish such trusts under the common law and how
recent statutory changes in some states have attempted
to address
these issues.
A. Enforceability of pet trusts
The primary practical problem with establishing a
valid and enforceable trust solely for the benefit
of a pet is that no human beneficiary exists with
standing to enforce the terms against the trustee.
That is, who could step into court to stop the
trustee from simply expending the pet trust funds
for items other than the benefit of the pet?
1. Common law solution
One way to avoid the enforceability problem under the
common law is to simply designate a human being or
organization as beneficiary of the trust and
provide that party with a proper incentive to enforce
the terms of the trust. (See
Traditional Legal
Trust for Pets.)
2. Statutory solutions
Over the last decade, several states have enacted
statutes expressly addressing the problem of
enforceability. These statutes tend to fall into one
of two categories.
(a) Honorary trust statutes.
An “honorary trust” may arise whenever a gift or
bequest of funds or other property is made for a
specified purpose, but there is no human beneficiary
to enforce the terms against the donee or devisee, who
is, in this context, the “trustee”. The legal effect
of a so-called honorary trust is that if the
trustee does not use the funds for the specified
purpose, then a “resulting trust” This
means that if the trustee fails to use the trust funds
for the intended purposes (i.e., the care of the pet),
the trust funds would pass to the person who would
have received such assets if no trust had been
established to begin with.
Under the common law, an honorary trust could
arise in a number of different contexts, such as the
maintenance of a monument. California
enacted a statute providing that a
pet trust will be considered a honorary trust –
i.e., the trustee must either use the funds to carry
out the terms of the trust as intended or distribute
the funds to the remainder beneficiary. In addition,
Wisconsin has a very general honorary
trust statute that would presumably cover pet
trusts. However, the current trend in recent
state laws has veered away from this approach, as
two states (Missouri and Tennessee) that had
originally enacted honorary trust statutes
have recently enacted versions of the UTC §408
(discussed below).
Relying on the existence of an honorary trust
for the benefit of a pet has its shortcomings.
Obviously, if the designated caretaker-trustee is also
the remainder beneficiary after the pet dies, then
this type of trust offers no protection at all. Even
if there is a third-party remainder beneficiary of the
trust, it is unlikely that such a beneficiary would
compel the caretaker-trustee to spend more of
the trust funds on the pet.
(b) Third party enforcement.
The modern statutory trend is manifested in the
Uniform Probate Code (UPC), and more recently, the Uniform
Trust Code (UTC). Section 2-907 of the UPC, provides that a
“pet trust” may be enforced by “an individual
designated for that purpose in the trust instrument
or, if none, by an individual appointed by a court
upon application to is by an individual.”
Section 408 of the UTC,
originally promulgated by the National Conference of
Commissioners on Uniform State Laws in 2000, similarly
provides that a pet trust may be enforced by “a person
appointed in the terms of the trust or, if no person
is so appointed, by a person appointed by the court.”
The same is true even in states such as
Iowa,
New Jersey,
New York,
and
Washington, which have
non-uniform statutes.
In essence, such statutes add a level of protection
for the pet that a true honorary trust does not
have – i.e., virtually anyone has standing to
enforce the terms of the trust against the
caretaker-trustee. Query whether a person designated
to enforce the trust under the terms of the governing
instrument has an affirmative fiduciary duty to
do so.
B. Validity under rule against perpetuities
The majority of states retain the infamous “rule
against perpetuities”, which was originally intended
to keep property from being tied up too long in trust.
Several jurisdictions retain the common law rule
against perpetuities – a beneficial interest in a
trust must vest or fail within 21 years after the
death of a human being living at the time the trust is created
and is irrevocable. Many states have enacted an alternative
statutory rule against perpetuities – e.g., all
interests must vest or fail within 90 years after
establishment of the trust. Some statutes
have provisions for implied construction to avoid a
violation of the rule or have adopted a “wait-and-see”
scheme. Generally speaking, however, if the rule against
perpetuities could be violated, within the
realms of logic (as opposed to reality), at the time a
beneficial interest in a trust is established, then
the interest is invalid from its inception. In
this regard, the life of a pet animal is not a
measurable life in being for purposes of applying the
rule, and as such, a trust for the life of a pet
logically violates the rule against perpetuities.
For example, consider a bequest of caretaking funds
“to X for the life of the pet, remainder to Y”.
Depending on the particular application of the common
law rule against perpetuities, either the remainder
interest to Y or the entire bequest would be invalid
because Y’s interest might not vest within 21
years after the death of some human life in
being. To be sure, this is an extreme example, but it
does illustrate the need for the drafter to be
familiar with the applicable rule against perpetuities in
preparing documents.
1. Common law solution
In reality, the problem with the rule against
perpetuities can be easily addressed within the terms
of a trust. That is, most trust agreements contain a
so-called “perpetuities savings clause” providing
that, regardless of what the rest of the trust
agreement says, all beneficial interests in the trust
must terminate or be distributable no later than some designated period in
compliance with the applicable rule against
perpetuities. If carefully drafted, such a provision
would not practically effect the duration of
the trust. For example, if the settlor has a large
family, the trust agreement contain a provision
requiring all beneficial interests to be distributed
within 21 years after the death of the last living
descendant of the settlor’s grandparents.
2. Statutory solutions
States with pet trust statutes directly address this
problem by simply providing that the pet trust is
valid notwithstanding the existence of a common law
and/or statutory rule against perpetuities. Of
course, this only begs the question of how long the
pet trust is permitted to last, and in this
regard, the various statutes take different
approaches.
The original 1990 version of UPC §2-907 simply placed
the pet trust within the common law perpetuities
period and provided that a pet trust
terminates upon the earlier of: (a) the
death of the last animal covered by the pet trust;
or (b) 21 years after the establishment of the pet
trust. While this statutory accommodation may be
sufficient for a dog or cat, it would clearly create
problems in trusts for pets with longer life
expectancies, such as parrots and certain reptiles.
In the Official Comment, the drafters of the original
version of
the UPC Code provision recognized this
issue and suggested that if a state intended to remove
the 21-year limit, it could do so by changing the
wording. Although no state has modeled its statute
on the original Uniform Probate Code provision, the same
approach is reflected in statute enacted in
New York.
In 1993, UPC §2-907(b)
was amended to simply provide that a pet trust
terminates when no living animal is covered by the
trust. This approach is also reflected in the
recently-enacted statutes of several other states that
have not expressly adopted the amended version of the Uniform Probate
Code.
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