Statutory Pet Trust

Sample Language for Statutory Pet Trust

Language similar to the following (in italics) could be used in the dispositive provisions of a pet owner's will or revocable living trust. This sample language below is intended for illustrative purposes only and should not be used or otherwise relied upon in drafting legal documents without accompanying legal advice and making necessary changes to appropriately integrate such sample language with the other provisions of the applicable legal document. (See discussion above.)

The Settlor hereby gives [his/her] pet, [NAME OF PET], [DESCRIPTION OF PET],[0] and the sum of [AMOUNT OF CARETAKING FUNDS] to the Trustee of the [NAME OF TRUST] (the “Trust”), to be administered and distributed as follows:

A. Trustee. [NAME OF INITIAL TRUSTEE] shall serve as initial Trustee; but in the event that [NAME OF INITIAL TRUSTEE] is unable or unwilling to serve, [NAME OF SUCCESSOR TRUSTEE] shall serve as successor Trustee. In the event that both of the above-named parties are unable or unwilling to serve, the successor Trustee shall be appointed by [NAME OF ENFORCER], if [NAME OF ENFORCER] is unable or unwilling to do so, by a court of competent jurisdiction.[1] The Trustee may resign upon by providing 30 days’ written notice thereof and possession of [NAME OF PET] to [NAME OF ENFORCER] or any other party appointed by the court to enforce this Trust. The Trustee may be removed, at any time, by [NAME OF ENFORCER] or by a court of competent jurisdiction, and upon receipt of written notice of removal, the Trustee shall relinquish possession of [NAME OF PET] and the remaining assets of the Trust to the duly-appointed successor Trustee, or if there is no such party, to [NAME OF ENFORCER].[2] Notwithstanding the foregoing, in no event shall [NAME OF ENFORCER] or any other party appointed by the court to enforce this Trust serve as Trustee.[3] Except as otherwise provided herein, the Trustee shall have all the rights, powers, duties, and obligations of a trustee under applicable law.

B. Expenditures and Distributions. During the term of the Trust, the Trustee shall be entitled to expend such sums of net income, and if necessary, principal, as the Trustee determines to be necessary or advisable for the health, care, and welfare of [NAME OF PET], including (but not limited to) food, veterinary care and/or insurance, toys and other recreational activities, and temporary boarding and/or pet-sitting fees. In exercising such discretion, it is intended that the Trustee will maintain [NAME OF PET] in the same standard of health, care, and welfare as the Settlor provided.[4] The Trustee is also authorized to pay, or reimburse to the Trustee, any income taxes attributable to the Trust and other necessary expenses associated with the administration and distribution thereof.[5] [OPTION: In addition to the foregoing, the Trustee is authorized to receive compensation in the amount of $______ per year.[6]]

C. Termination and Final Distribution. The Trust shall terminate upon the earlier of the following: (a) the net value of the Trust assets (other than [NAME OF PET]) decreases to less than $_______; [7] or (b) the death of [NAME OF PET]. If termination of the Trust occurs because of the death of [NAME OF PET], the Trustee shall, at the expense of the Trust, provide for the respectful and proper disposition of the remains of [NAME OF PET], pay any remaining debts and expenses of the Trust, and then distribute the remaining assets of the Trust to [NAME OF REMAINDER BENEFICIARY] OPTION FOR CHARITABLE BENEFICIARIES: “; provided, however, that if [NAME OF REMAINDER BENEFICIARY] does not then qualify as an organization exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code, then the Trustee shall select an appropriate tax-exempt organization that provides for the care of similar pets to receive such distribution"]. If termination occurs for any other reason, the Trustee shall distribute the remaining assets of the Trust to the Trustee, who shall hold such assets outright and free of trust, but conditioned on providing for the continued health, welfare, and care of [NAME OF PET].

D. Enforcement of Trust by Third Party. The purposes and terms of this Trust may be enforced, at any time, with or without court intervention, by [NAME OF ENFORCER], or if [NAME OF ENFORCER] is unable or unwilling to do so, by any party appointed by a court pursuant to [CITATION TO PET TRUST STATUTE]. To this end, [NAME OF ENFORCER] may (but is not required to) request an accounting for the funds of the Trust, not more frequently than quarterly, and inspect [NAME OF PET] and the conditions of the premises where [NAME OF PET] is kept, from time to time, to ensure that appropriate care is being provided by the Trustee. This provision shall apply even if the party granted enforcement powers is not a beneficiary of the Trust.[8] Notwithstanding the foregoing, no provision in this paragraph shall be construed to limit the rights of the Trustee and the beneficiaries to enforce the terms hereof.

E. Purposes. While [NAME OF PET] is alive, the primary purpose of the Trust is to provide for the health, care, and welfare of [NAME OF PET].[9] Notwithstanding, if at any time, [NAME OF PET] suffers from a medical or physical condition or illness and the Trustee determines, based on a written opinion of a veterinary professional who has examined [NAME OF PET], that it would be more humane to euthanize [NAME OF PET], then the Trustee is authorized to do so at the expense of the Trust.[10]

F. Spendthrift Provision. As a material purpose of the Trust, the interest of any beneficiary in the net income or principal shall not be subject to the claims of any creditor, any spouse for alimony or support, or others, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered. Except as otherwise provided, no beneficiary’s interest shall be subject to anticipation, assignment, sale or transfer in any manner, nor shall any beneficiary have the power to anticipate, alienate, encumber or charge such interest, voluntarily or involuntarily, nor shall such interest be liable for or subject to the debts, obligations, liabilities, torts or contracts of any beneficiary.[11]

G. Applicable Law. This Trust is established by the Settlor and accepted by the Trustee under the laws of the State of [NAME OF STATE], and in particular, [CITATION TO PET TRUST STATUTE], and all questions concerning its validity and construction shall be determined under [NAME OF STATE] law, regardless of any change in the situs of the Trust.

[0] As an alternative to specifically naming the pet throughout the Trust (as provided above), the drafter could simply refer to the "Settlor's pets" and define the term to include all the pets owned by the Settlor at the time of the Settlor's death. This approach takes into account the fact that the Settlor may have a different group of pets at the time of his or her death.

[1] The trustee succession provisions may be drafted in a number of different ways. In addition, the applicable pet trust statute may allow a court to designate a successor trustee of a pet trust.

[2] In a statutory pet trust, the trustee has control over the pet and the funds, so at a minimum, the third-party enforcer should be able to remove the trustee without court intervention if necessary. As drafted, the above clause gives the third-party enforcer broad authority to do so, although such authority could be limited to removal for cause.

[3] Even if it is possible under the statute, the whole reason for creating a pet trust dictates that the trustee and the third-party enforcer should never be the same person.

[4] This provisions defines how the funds of the pet trust are to be used, and in doing so, attempts to balance the needs for detail in instruction with flexibility in execution.

[5] As discussed in the outline, it is unclear how a statutory pet trust would be taxed in this situation. In any event, this clause ensures that any taxes paid by the trustee will be reimbursed from the trust funds.

[6] This clause is entirely optional. In a perfect world, as a matter of incentives, the pet-owner would prefer to choose a caretaker who would be willing to care for the pet without compensation.

[7] It is assumed that, when the value of the funds falls under a certain amount (e.g., $1,000), it would no longer be cost-effective to keep the pet trust in tact. In the alternative, this clause could provide for the “exhaustion of trust assets”.

[8] The enforcement of the trust by a non-beneficiary is one of the legal obstacles to creating a legal trust for the benefit of a pet that is intended to be addressed by the pet trust statute. See A.R.S. §14-2907(4). This clause is intended to define the third-party enforcer and certain rights that are essential to that function. However, as encountered with provisions trust protectors, the question remains as to whether such a third party has fiduciary duties associated with the rights to enforce the pet trust.

[9] The degree of importance of the purposes of the pet trust should be expressly stated, especially considering its unorthodox nature.

[10] Given the nature of the pet trust, the issue of euthanasia should be expressly discussed in the terms of the Trust.

[11] This provision is intended to protect the assets of the Trust form the creditors of the Trustee and the beneficiaries.