Pets and Estate Planning: with or without you, pets are a lifetime commitment

How to ensure your pet has a good life if you die first

Seattle and the entire Puget Sound region are among the most pet-friendly areas in the U.S., and we take our commitment to guardianship seriously. We cherish our pets, consider them family. We worry about whether our pets are getting the right foods, the safest toys, the best training and exercise, about whether they are properly socialized, going to the best veterinarians, etc.

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If you’ve ever loved, or are currently in love with a pet, you know the joy of sharing your life with an animal far outweighs the eventual heartache most of us bear when they leave us.  It’s never easy, but we expect to outlive our pets.

But what happens when they outlive us? Would your pets thrive in your absence?

One simple step can ensure they will — include your pets in your estate plan. If you don’t already have an estate plan, get one — and include your pets. Here’s why:

Part 1: Pets are property

In Washington State, pets essentially have the same legal status at your death as your sofa – they are personal property. In the absence of another direction in an estate plan, a pet passes to whoever would inherit your other personal property. This can be problematic — while you might want your father or your brother or your daughter to inherit your car or jewelry or sofa, he or she might not be the best person to love and care for your pet.

Here’s a hypothetical, but very real example:

dogSheila is a 26-year-old single woman with two dogs, a lab mix, Baxter, and a golden retriever, Teddy. She hopes to have children one day, but right now her dogs are her “babies.” She works hard to satisfy their needs for good nutrition, exercise, medical care, training, and overall well-being. Sheila has a large social network of dog-loving friends.

An only child, Sheila has a great relationship with her parents who live nearby. Her parents are touched but a little baffled by Sheila’s devotion to her dogs; still they are the first to admit that they are not “dog people.”

When Sheila thinks of estate planning – which admittedly, she doesn’t often – she thinks it is for someone older, more mature, more settled than she is. But after hearing about Leona Helmsley and her extravagant pet trust, Sheila got to thinking about what would happen to Baxter and Teddy if she were to die unexpectedly.

As much as she loves her parents, Sheila knows Baxter and Teddy would be better off living with Emily, one of her dog-savvy and dog-loving friends.

Although Sheila would like to have Emily care for her pets in the event of tragedy, she isn’t sure how that would work – or whether Emily could afford to care for the dogs for their lifetimes.

Sheila and Emily have promised each other that they will care for the other’s pets, but this plan is inadequate. Their informal arrangement presents numerous problems.

If Sheila were to pass away without a will, her wishes regarding Baxter and Teddy would not be recorded. There would be competing interests – Sheila’s parents, who would inherit the dogs under Washington law, may want to keep the dogs out of a perceived sense of loyalty to Sheila, even though they aren’t the best caretakers. And Emily would have no way to enforce Sheila’s wishes.

Can Sheila make this work? Yes, instead of making insecure plans with well-meaning friends, Sheila should work with an estate planning attorney to create an estate plan to formalize her goals for her pets.

The issues facing Sheila are similar to the decisions a parent makes with regard to a guardian for a minor child. I encourage pet owners to think about who should care for their pets just as I encourage parents to think carefully about any guardian they name in their wills. A will gives you the power to legally choose who will care for your pet. Your wishes will be clear and enforceable.  Having a formal plan also frees family members from the burden of having to make this decision for you when they’re already suffering emotional distress.

Part 2: Paying for pet care

Once you’ve taken care of the “who,” the next step is making sure the “how” is taken care of, meaning the financial piece of pet guardianship. Caring for pets can be expensive. I encourage my clients to think about how their pet’s caretakers will pay for their new family members’ care.

Providing financial protection ensures the new guardians will be able to afford the costs of caring for your pet in the manner you designate, including veterinary visits, food, pet sitting, grooming, exercising and more, without bearing the financial burden themselves.

In our own wills, my wife and I have designated portions of our life insurance to cover our dog’s expenses for her lifetime. This ensures she will be cared for, without putting a financial burden on her new guardians.

An estate-planning attorney can help you choose the best financial tool for covering the costs of caring for your pet. In many cases, clients can make a simple cash bequest to the new caretakers. Many of my clients, for instance, expect that one of their children will care for their pets when they are gone. I discuss with these clients whether it makes sense to provide an extra bequest to the designated caretaker to cover pet care costs.

Other clients may need to establish more complex structures, which may include a “pet trust” or other financial tool. An estate-planning attorney will help you decide what works best for your situation.

Part 3: Who can best care for my pet?

Recall that in Part 1 of this article Sheila had a good choice to care for her pets in the event of tragedy. Not everyone has that option. What if you don’t have someone like that in your life?

Another hypothetical:

cat on tableMary is a 76-year-old retired nurse living in Bothell. She has two four-year-old cats, George and Abby. Mary is single, with no children. Although Mary has a rich social life, she does not know anyone who would be a good choice to care for her beloved pets if she were to pass away during their lifetimes.

A pet-savvy estate planning attorney could help Mary find and research other options. For example, some local animal welfare organizations will foster or re-home pets in exchange for a portion of your estate. Or perhaps Mary could appoint an individual or panel to take responsibility for finding the best possible home and guardian for her pet. Regardless of the plan, an estate-planning attorney should be involved to ensure that her wishes are clearly spelled out and legally binding.

Without a designated caretaker, or a plan for finding one, Mary’s cats could eventually end up in a shelter. While we are fortunate to have many wonderful rescue organizations in our area, it’s important to consider the stress and uncertain future your pet could face with this option. Don’t get me wrong, my wife and I are forever grateful to shelters for doing such wonderful work rescuing animals – our own dog’s life was saved by two different shelters, and we both continue to support animal welfare organizations –but by making a plan for your pet, not only will you have peace of mind that your pet will be cared for, you’ll also avoid burdening the shelter system.

It’s more than just setting aside money.

No one knows your pet as well as you do. Documenting what you know will help your pet and a new guardian adapt more quickly to their new lives together. Sharing the basics, such as diet, exercise and medical information is important, but so is describing your pet’s personality, including all the quirks that make him or her unique. Listing favorite toys, how s/he likes to be petted (if at all), social skills with other people and animals, and other information will all help everyone bond more quickly.

Our complimentary Pet Profile form can help you pass your knowledge of your pet on to potential caregivers. Simply e-mail us your full name to receive a link to the form.

What You Can Do

  • Identify one or more caretakers for your pets.
  • Contact an estate planning attorney that shares your concern for your pet’s welfare.
  • Execute a will that includes both a guardian and financial support for your pets.
  • Email me for a Pet Profile form and share it with family members, identified caretakers, and veterinarians, and keep a copy with your will.
  • Enjoy peace of mind that your commitment to your pets will last for their lifetimes.

Final Word

Most everyone knows they should have an estate plan. The reality is that many people don’t bother to make one until they’re touched by a life event that highlights the perils of not having a plan.

Talk with an estate planning attorney that understands the issues surrounding pets in estate plans, one that shares your concerns about pet welfare. Including your pet in a will is the best way to truly make a lifetime commitment for your pet.

Photos courtesy of TwoHoundsandaCat.com.

Understanding Probate Assets

What you need to know

What if the people you thought would inherit your estate didn’t – simply because you weren’t advised about the difference between “probate property” and “non-probate property”? (Probate is the court-supervised legal process by which a deceased persons assets are distributed.)

Many people unwittingly add to the difficulties facing their descendants by not understanding the importance of coordinating their “non-probate” assets with their estate plan. In this newsletter, I will lay out the problem – which you may have and not even know it – and talk about how to make sure everything works the way you intend.

You Don’t Know What You Don’t Know

Do you have you a will?  If so, you may assume that all of your property will be distributed according to the terms of that will.  Unfortunately, what you may not realize is that the terms of your will are not going to direct the disposition of some of your assets – or, perhaps, most of your assets.

Your will if you have one (and state law, if you don’t) dictates how your assets will be distributed to your spouse, your family, and your favorite charities. But, it is important to recognize that only “probate assets” will be distributed by the terms of your will – your “non-probate” assets will not.

Life insurance and retirement accounts (such as 401(k) plans and IRAs) are classic examples of non-probate assets. When you die, these assets are usually distributed to the person you designated as your beneficiary.

Other assets, such as your house, checking and savings accounts, and investment accounts could be probate or non-probate assets. With these assets, title is the determining factor.  For instance, John and Mary Smith are married. If their house deed lists them as “John Smith and Mary Smith, as husband and wife,” their house is probate property and the disposition will be governed by their will. If title is listed as “John Smith and Mary Smith, as joint tenants with right of survivorship,” the house will pass as non-probate property to the surviving spouse at the first spouse’s death. The same applies to bank and investment accounts.

Does it matter whether the house passes to the surviving spouse via title or according to the terms of a will? Absolutely – depending on the individual’s plan, the differences can be profound!

Meet Justin and Lindsay

Consider Justin and Lindsay, a married couple in their early forties with two children, aged 12 and 15.  Justin and Lindsay own $2 million in joint assets, including their house and retirement accounts, and each has a $1M term life insurance policy.

Their basic plan is pretty straightforward.  If one of them dies, they want the surviving spouse to have access to all of their wealth; at the second death, they want whatever is left to pass primarily to the children, with some charitable gifts.
After talking to their attorney, they decide that their plan should include a trust that will be funded at the first death with the assets of the first spouse to die.

There are many good reasons to create a trust as part of an estate plan – even for those of relatively modest means.  In Justin and Lindsay’s case, a trust will help them reduce estate taxes and help them ensure that the assets owned by the first spouse to die will actually pass to their children and not be spent contrary to the deceased spouse’s wishes.

Unfortunately, what Justin and Lindsay didn’t know – and their attorney didn’t adequately explain – is that the plan in their will, the one they worked so hard on, won’t be implemented if one of them dies. Why?  Because they have little or no probate property to fund the trust – all of their significant assets will instead pass according to beneficiary designations and title.

When a Will Is a Won’t

Like many people, when Justin and Lindsay bought their house, opened their investment accounts, and filled out their 401(k) beneficiary designations, they paid little attention to the named beneficiaries on their retirement and life insurance accounts and even less attention to how their real estate and investment assets were titled.

They had named each other as the beneficiary of their life insurance and 401(k) accounts; the house’s deed was titled as “joint tenants with right of survivorship”. Their investment account was titled in both of their names with a “payable on death” provision that would transfer the entire account to the surviving spouse.

As a result, if one of them were to die, there would be no probate property to be distributed according to the terms of the will. Instead of funding a trust at the first death to protect their children’s inheritance and reduce estate taxes, the surviving spouse would inherit everything, frustrating their plan.

The Un-Charitable Donor

Failure to coordinate non-probate assets as part of an estate plan can create havoc in blended families where the parties have taken care to create a plan to protect everybody’s interest. This can also be problematic where the parties want to leave assets to charity or other beneficiaries.

This is not a minor, theoretical problem. I was involved in a case in which a charity did not receive a gift at the donor’s death because the bulk of the donor’s wealth was held in her checking account which had a “payable on death” provision for the benefit of one of her two daughters.  As a result, at the donor’s death, the vast majority of her wealth passed to one daughter (apparently contrary to her wishes). The charity and the other daughter were left in the lurch.

How To Make Sure Your Plan Gets Implemented

Could this happen to you or your family?  Unfortunately, yes.

Most people fail to understand the importance of beneficiary designations and title on their estate plan. Banks and financial institutions, for instance, often encourage people to create payable on death accounts, and the customer agrees without considering the impact on his or her estate plan.

Periodically reviewing your beneficiary designations and title to your assets is an essential part of your estate planning process. Seemingly minor differences in title can have a profound impact on how assets are distributed after death.
So, how should you designate and title your non-probate assets?

  1. Discuss and determine your personal goals for asset transfer
  2. Work with an experienced estate attorney who will consider ALL of your assets, those falling in and outside probate and explain how this impacts your goals
  3. Confirm that your beneficiary designations and title are consistent with your estate plan, and if not, correct them.
  4. Structure a plan for the future that aligns all of your assets with your goals, and commit to periodic reviews as life changes occur.

Final Thoughts

Estate planning is not just for the very wealthy.  Anyone who owns property, investments, and/or life insurance should have a conversation with an estate planning attorney.

To learn more about how Cairn Law can help you create, review, or revise your estate plan and explore the probate services we offer, visit our website. We also encourage you to share this newsletter with a friend.