Bette Heller, P.C. ATTORNEY AT LAW 19671 E. Euclid Drive 3333 S. - PDF document

Bette Heller, P.C. ATTORNEY AT LAW 19671 E. Euclid Drive 3333 S. Bannock St. • Suite 900 Aurora, CO 80016 Englewood, CO 80110 303-690-7092 Phone Phone 303-761-4900 303-690-0757 Fax Fax 303-488-9889 MAKING PROVISIONS FOR THE CARE OF YOUR ANIMALS AFTER YOUR INCAPACITY OR DEATH I. TRUSTS FOR ANIMALS A. Legal Concerns A “Pets Trust” is a trust created for the care of a particular animal (or animals). In many States, these trusts are not valid because there is no beneficiary who can enforce its provisions and they violate what is called the Rule Against Perpetuities. Colorado does honor “Pets Trusts”, and our Statute is one of the best. C.R.S. §15-11-901 (2) and (3). It provides that a trust can be set up for the care of one or more designated animals during their lifetime; and can also continue for the lifetimes of their offspring which are “in gestation” when the pets become present beneficiaries of the trust. B. A Word of Caution Since Trusts can be created for the care of any type of animal, as long as it is not part of a business venture, I prefer to call these “Animal Trusts” , rather than “Pet Trusts”. Specifically, there are animals that some people consider their “pets”, which are really livestock, such as Horses. Calling these animals “pets” could eventually result in the loss of their livestock designation, which would in turn result in the loss of many protections that they currently have under the Department of Agriculture. C. Trust Provisions A “Animal Trust” can be included in a Will or Revocable Living Trust, to take effect upon the Testator/Settlor’s death. One can also set up a Charitable Remainder Trust if the client is making a charity the remainder beneficiary after the death of the animal(s). A Trust for animals should specify the following provisions: - a description of the animal or animals to be cared for. - who is to be the Caregiver; and the Successor Caregiver. - who is to be the Trustee; and the Successor Trustee. - what types of things can be paid for by the Trust: medical care, food and shelter, grooming, training, travel with the caregiver, etc; you can be very specific or you can leave it up to the Trustee to decide.

Making Provisions for the Care of Your Animals after your Incapacity or Death Page 2 - whether both income and principal can be used for the care of the animal(s); or just income, leaving the principal for the remainder beneficiaries; and what about capital gains? are they to be considered income or principal? - when will the trust end; after a specific period of years, or after the death of the animal(s). - who is to receive the remaining funds of the trust after the trust ends = the remainder beneficiary(ies). - who is to receive the trust funds if the trust fails = contingent beneficiary(ies). D. Miscellaneous In Colorado, “Animal Trusts” are subject to the same rights and restrictions regarding administration that all other trusts are subject to, such as Trust Registration rules, and rules of fiduciary conduct. All income earned by an “Animal Trust” is considered to be accumulated in the trust and income taxes will be paid by the trust at the trust’s income tax bracket. As specified above, laws vary from State to State: - special language should be included in the trust to try to make sure that the intent of the maker of the trust will be upheld, even if the trust is being administered in a State that does not recognize “Pets/Animal Trusts”. - the client should be advised that if he/she moves to another State, he/she should have his/her legal documents reviewed by an attorney in that State. - also, there is always the possibility that the provisions for the care of animals might be challenged by a disgruntled remainder beneficiary or heir of a Decedent. Therefore, it is wise to provide in all such trusts, language which will protect the intent of the maker should the provisions of the trust for the benefit of the animals be deemed invalid. The following is a sample of such language: Contingent Provisions: It is my intention that this trust shall be valid under the present Colorado Probate Code, as well as any future changes in such Code, and regardless of the situs of administration. Therefore, it is my intention that the animal(s) covered by this trust shall be considered measuring lives under any Rule Against Perpetuities, if such becomes necessary to validate this trust. If this trust shall fail for any reason, I direct that the funds be paid outright to the caretaker(s) of such animal(s), in equal shares, and that any remainder interest shall lapse.

Making Provisions for the Care of Your Animals after your Incapacity or Death Page 3 As with any other trust, if the language of the trust is ambiguous or misleading, the trustee may find him/herself in front of the Court requesting an interpretation or involved in some sort of contest regarding the administration of the trust funds. Therefore, it is important that the drafter try to consider all contingencies and draft clearly. II. What About Incapacity Provisions should be made for the care of animal(s) in case the owner becomes incapacitated and can no longer take care of them. Provide in the Durable Power of Attorney for Finances that: - the client’s funds should be used for the care of animal(s); - the attorney-in-fact can use the provisions for animals which are contained in the client’s Will or Trust, while the client is incapacitated. The following is a sample of such language for a Durable Power of Attorney: 4. Distributions. My Attorney-in-Fact, acting with sole and absolute discretion, shall distribute from time to time such of the income or principal, or both, of my assets to or for the benefit of myself and others who I have supported or otherwise identified to my Attorney-in-Fact prior to the date of this Power of Attorney, to the same extent as I myself might have done. This would include the expenses associated with the care of any and all pets/animals which I own. If I am unable to keep such pets/animals with me, my Attorney-in-Fact is authorized to find suitable other homes for them, either permanently or temporarily, and to follow any instructions I may have left under my Will or otherwise regarding such pets/animals. III. Alternatives to Trusts A trust is not always the best option for an individual. Each client’s situation should be analyzed based on: - amount of money available for the animal’s care; - amount of money available to set up the trust before death; - whether there are people the client can trust to take care of the animal(s) without the need of a trust. Other Options include: - Outright cash bequest to Guardian/Caregiver; - the bequest can be contingent upon the person actually taking the animal; - however, there is no control over how the money is then used by the caregiver once he or she receives it.

Making Provisions for the Care of Your Animals after your Incapacity or Death Page 4 - Arrange for family or friends to care for the animals; - The Guardian program at the Denver Dumb Friends League. IV. Articles on Pets Trusts A great many articles have been written about what is commonly called “Pets Trusts”. A few such Articles are: - “Highlights of the Uniform Probate Code, Article II” - “Part 9: Honorary Trusts; Trusts for Pets” by Bette Heller - The Colorado Lawyer , October 1994. - “Trusts for Pets” by Bette Heller - The Colorado Lawyer , March 1997. - “The Untold Fable of the Tortoise and the Fox” by James F. Ingraham - CBA Trust & Estate Section Council Notes , June 1997. - “A ‘Pet’ Project for State Legislatures: The Movement toward Enforceable Pet Trusts in the Twenty-First Century” by Jennifer R. Taylor - Quinnipac Probate Journal , 1999 Vol.13. - “Estate Planning for Pets” by Gerry W. Beyer - Probate and Property Magazine of the ABA, July/August 2001. - “Pet Animals: What Happens When Their Humans Die?” by Gerry W. Beyer - Santa Clara Law Review, Volume 40, 2000.