ATLANTA — When Jean Allred was doing her estate planning, first and foremost were her babies.
She wanted to ensure that Jack, Molly, Annie and Gordon were well taken care of after she died or if she became incapacitated.
That includes money for expenses like food, bedding and medical care.
Her babies are of the four-legged variety, and her planning illustrates a growing trend.
Currently, 67 percent of U.S. households own at least one pet, and many people now consider long-term planning for them just as important as they would for two-legged family members.
“They were kind of like No. 1,” in terms of planning, said Allred, 58, a quality control manager. “If you think about it, animals are completely vulnerable. They can’t take care of themselves. If something happened to me, I’ve got to make sure they’re cared for and that somebody doesn’t take them to a shelter and they’re euthanized. That just keeps me up at night.”
Indeed, for many households, pets are viewed as valued members of the family. They provide companionship, and studies show they help reduce stress.
They sleep in the same bed. Their owners take them to restaurants and on vacations.
In fact, a 2018 Realtor.com survey found that 79 percent of millennials who bought a home said they would pass on an otherwise perfect home if it didn’t meet the needs of their pets.
Estate lawyers and investment advisers are aware of the trend.
Fidelity Investments offers tips on its website for pet owners, advising people to be upfront about what it takes to care for your pet. Fidelity also advises that once a caregiver has been identified, a plan should be put in place that details what needs to happen immediately after the death of the owner.
Pets, though, are considered property and have no legal rights, so it’s up to you to plan for their care.
Some questions you may want to explore:
What is the difference between a pet trust and a will?
Does it vary by state?
Is the trust independent from the will?
What happens to the leftover funds after your pet dies?
Can you designate money from your 401(k) to care for a pet?
To come up with a plan, Allred looked at the life expectancy of each animal and factored in the average vet bill, food and extra money in case something catastrophic happened.
According to the American Society for the Prevention of Cruelty to Animals’ pet care cost table, the annual cost to care for a dog can range from $737 to $1,040, while the annual cost for cat care is around $809.
The cost of caring for both dogs and cats can vary depending on age, breed, weight, and other qualities such as special medical or training needs.
Some pets can live even longer. Horses generally have long lives, and certain birds can live more than 70 years.
For Allred, it was more than financial, though.
She had to find committed caregivers. A brother, who is the executor of her estate, agreed to take her two dogs, Jack and Molly. Allred stipulated that the two dogs stay together and that her cats not be separated.
She’s been in a similar situation.
Several years ago, a neighbor asked her would she look after his mostly feral cat, Gordon, if he died. She agreed.
Not long after, the neighbor died unexpectedly of a massive heart attack. “I never had second thoughts,” Allred said. “I went right down there and got him.”
Their arrangement was informal, although experts say owners should have a committed plan and legal caregiver. It also helps to check in with your designated caregiver. Situations change.
Someone who agreed to take your pet three years ago may develop a health or other personal issue.
Allred’s neighbor didn’t leave money to care for Gordon, but that didn’t matter to her. That may not be the case with others.
When Erika Orcutt, an attorney, first started her practice 20 years ago, she saw very few cases in which clients even talked about including pets in their estate planning.
Now it’s about 20 percent.
She often asks clients if they have pets and whether they have a plan in place for their care. “It’s definitely gone full spectrum in terms of being an item in the estate planning process,” she said.
Most people don’t think about including the pet in estate planning.
More than likely, they expect family members and friends to do the right thing, “and that can be problematic, but something you can avoid with advance planning.”
In Georgia, pets are considered property, so you can’t leave anything to them directly in a will, she said.
You can, however, leave money to a loved one or friend to care for the pet, but there’s no guarantee the money will be used to that end.
“Once you give the money to that person, there’s nothing to force them to spend it on the animal. You can leave $5,000 to your sister, Jane, to care for the animal, but that doesn’t have the same teeth (as a trust). Once Jane gets the money, there’s no real way to force her to spend it on the animal.”
A trust, though, is more legally binding when it comes to caring for animals, Orcutt said. It can also be specific, including how often a pet should see the vet and cover its standard of living.
In a pet care agreement, the executor or lawyer could go to court to enforce the contract.
Typically, a trustee will hold property “in trust” for the benefit of the person’s pets, according to ASCPA. Payments to a designated caregiver will be made on a regular basis. The trust, depending upon the state in which it is established, will continue for the life of the pet or 21 years, whichever occurs first. Some states allow a pet trust to continue for the life of the pet beyond the 21 years.
Many experts advise against a will alone.
It takes time for a will to be probated, and there could be challenges. What happens to the pet then?
The general responsibility of the executor is to oversee assets of the estate, and property is one of them. It is different, though, when that property has be fed and walked.
Relatives or close friends are often looked to to fill the void, but may not have an interest in caring for a pet or the ability to do so.
Atlanta attorney Nancy Goodman said a pet cannot be named as a beneficiary of 401(k) or IRA.
“It is possible to name a trust as a beneficiary of a retirement account, but the funds would be subject to immediate taxation if payable for the benefit of a pet,” she said. Goodman added that it’s generally advisable to use retirement funds to provide for a person or persons, so that required minimum distributions are payable — and taxed — over the lifetime of the oldest beneficiary. That preferred tax treatment doesn’t work for non-persons such as animals or charities.