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Pet Trusts - the How to Guide 2009 Emerging Issues 4192 Research Sol utions August 2009 LexisNexis ® Emerging Issues Analysis Stephanie G. Rapkin on Pet Trusts - The How to Guide 2009 Emerging Issues 4192 Clients of all incomes and all net worths are interested in pet trusts. Irrespective of the news headlines, pet trusts are not just for the very rich or the terribly eccentric. The first pet trust I created many years ago was for a young single woman with limited financial resources, but she was concerned that her two-year-old retriever was not adoptable as he required regular veterinarian care and medications. Fortunately, the state where I practice has for decades had a provision for honorary trusts that allows for the creation and recognition of a pet trust. 1 Today, there has been a societal shift to recognizing the importance of caring for pets after the death of the owner. The ability for practitioners in a variety of jurisdictions to create a pet trust has expanded due to many states incorporating Uniform State Laws in their legislation. Both the Uniform Trust Act and Uniform Probate Code have created provisions legitimizing trusts for the care of an animal after the owner's death. Nearly 40 states have adopted one or the other, either as proposed by the National Conference of Commissioners on Uniform State Laws, or modified. 2 Section 2-907 of the Uniform Pro- bate Code (1990) 3 provides for a governing instrument caring for a pet to be liberally 1. Wis. Stat. § 701.11 (1) states in part, “where the owner of property makes a testamentary transfer in trust for a specific non- charitable purpose, and there is no definite or definitely ascertainable human beneficiary designated, no enforceable trust is created; but the transferee has power to apply the property to the designated purpose, unless the purpose is capricious.” 2. The Uniform Probate Code Section 2-907, or a version thereof, has been adopted by: Alaska, Arizona, Colorado, Hawaii, Illi- nois, Michigan, Montana, North Carolina, South Dakota and Utah. The Uniform Trust Act Section 408, or a version thereof, has been adopted by: Alabama, Arkansas, District of Columbia, Florida, Kansas, Maine, Maryland, Missouri, Nebraska, New Hampshire, New Mexico, North Dakota, Ohio, Oregon, Pennsylvania, South Carolina, Tennessee, Virginia and Wyoming. States adopting another approach are: California, Idaho, Indiana, Iowa, Nevada, New Jersey, New York, Rhode Island and Texas. Connecticut has also just adopted its own version effective October 1, 2009. 3. Section 2-907. Honorary Trusts; Trusts for Pets. (a) [Honorary Trust.] Subject to subsection (c), if (i) a trust is for a specific lawful noncharitable purpose or for lawful noncharitable purposes to be selected by the trustee and (ii) there is no definite or definitely ascertainable bene- ficiary designated, the trust may be performed by the trustee for [21] years but no longer, whether or not the terms of the trust contemplate a longer duration. (b) [Trust for Pets.] Subject to this subsection and subsection (c), a trust for the care of a designated domestic or pet animal is valid. The trust terminates when no living animal is covered by the trust. A governing instrument must be liberally construed to bring the transfer within this subsection, to presume against the merely precatory or honorary nature of the disposition, and to carry out the general intent of the transferor. Extrinsic evidence is admissible in determining the transferor's intent. TOTAL SOLUTIONS Legal Academic Risk & Information Analytics Corporate & Professional Government LexisNexis, Lexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used under license. Matthew Bender is a registered trademark of Matthew Bender Properties Inc. Copyright © 2009 Matthew Bender & Company, Inc., a member of the LexisNexis Group. All rights reserve d. -1 - Research S ol utions LexisNexis ® Emerging Issues Analysis Stephanie G. Rapkin on Pet Trusts - The How to Guide construed and enforced as opposed to a precatory or honorary request of the governing instrument, while Section 408 of the Uniform Trust Act 4 provides for legitimizing a trust (or portion thereof) specifically designed for an animal. (c) [Additional Provisions Applicable to Honorary Trusts and Trusts for Pets.] In addition to the provisions of sub- section (a) or (b), a trust covered by either of those subsections is subject to the following provisions: (1) Except as expressly provided otherwise in the trust instrument, no portion of the principal or income may be converted to the use of the trustee or to any use other than for the trust's purposes or for the benefit of a covered animal. (2) Upon termination, the trustee shall transfer the unexpended trust property in the following order: (i) as directed in the trust instrument; (ii) if the trust was created in a nonresiduary clause in the transferor's will or in a codicil to the transferor's will, under the residuary clause in the transferor's will; and (iii) if no taker is produced by the application of subparagraph (i) or (ii), to the transferor's heirs under Section 2-711. (3) For the purposes of Section 2-707, the residuary clause is treated as creating a future interest under the terms of a trust. (4) The intended use of the principal or income can be enforced by an individual designated for that pur- pose in the trust instrument or, if none, by an individual appointed by a court upon application to it by an individual. (5) Except as ordered by the Court or required by the trust instrument, no filing, report, registration, peri- odic accounting, separate maintenance of funds, appointment, or fee is required by reason of the ex- istence of the fiduciary relationship of the trustee. (6) A Court may reduce the amount of the property transferred, if it determines that that amount substan- tially exceeds the amount required for the intended use. The amount of the reduction, if any, passes as unexpended trust property under subsection (c)(2). (7) If no trustee is designated or no designated trustee is willing or able to serve, a Court shall name a trustee. A Court may order the transfer of the property to another trustee, if required to assure that the intended use is carried out and if no successor trustee is designated in the trust instrument or if no designated successor trustee agrees to serve or is able to serve. A Court may also make such other orders and determinations as shall be advisable to carry out the intent of the transferor and the pur- pose of this section. 4. The Uniform Trust Act (a) A trust may be created to provide for the care of an animal alive during the settlor's lifetime. The trust terminates upon the death of the animal or, if the trust was created to provide for the care of more than one animal alive during the settlor's lifetime, upon the death of the last surviving animal. (b) A trust authorized by this section may be enforced by a person appointed in the terms of the trust or, if no per- son is so appointed, by a person appointed by the court. A person having an interest in the welfare of the ani- mal may request the court to appoint a person to enforce the trust or to remove a person appointed. TOTAL SOLUTIONS Legal Academic Risk & Information Analytics Corporate & Professional Government LexisNexis, Lexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used under license. Matthew Bender is a registered trademark of Matthew Bender Properties Inc. Copyright © 2009 Matthew Bender & Company, Inc., a member of the LexisNexis Group. All rights reserved. - 2 - Research S ol utions LexisNexis ® Emerging Issues Analysis Stephanie G. Rapkin on Pet Trusts - The How to Guide The statutes were intended to honor the legality of a bequest to a pet by giving a be- quest of this nature both the recognition and enforcement of a court. The statutes do not provide the provisions required for personalization or customization, but rather are sim- ply a framework for the drafter to be comfortable with when developing the appropriate vehicle, be it an inter vivos trust or a testamentary trust. Naturally, it is incumbent on the practitioner to comply with the rules of the state where they are drafting. But if the state rules are unfavorable there is also a possibility of creat- ing a trust in a different (more favorable) jurisdiction. Changing the situs of an existing trust is also a viable option. To create a trust in another jurisdiction the document should name a trustee in the selected jurisdiction along with instructions that the funds be held and administered in that jurisdic- tion, or, prior to death, there should be at least some property held in that selected jurisdic- tion providing some nexus to the favored state. Changing the situs from one state to another might be accomplished through an express provision in the trust instrument, a pertinent statute, or a court petition. Generally, the courts have permitted the transfer of a trust when: (1) there is no contrary intent expressed in the trust instrument; (2) the administration of the trust will be effectuated similarly to that of the original state; and (3) the interests of the beneficiaries will be honored as intended. 5 Regardless of whether the trust situs is to be changed or an alternative state originally se- lected, the governing instrument should contain a provision and designation of which se- lected state will govern both matters of construction and administration to help alleviate any questions that may block the situs selection or change. Testamentary Trusts. There is still much to consider when determining the type and style of trust which is appropriate for the situation.
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