Pet Trusts. Not Just For the 1%
Trusts for Pets: Not Just for the Super-WealthyA pet left out of a client's estate plan could end up in a shelter or euthanized, attorney Jason Smolen tells ThinkAdvisor.
By Jane Wollman Rusoff | April 10, 2019 at 10:22 AM
There’s no shortage of fancy stuff wealthy folks can lavish on their pets: $20,000 dog houses, $9,000 cat condo towers, $3,000 mattresses studded with gold.
Notwithstanding such extravagances, making sure that clients’ beloved pets live in the style to which they’re accustomed after their owner’s death is an idea that’s practical, if not kind. This is easily accomplished by including the animals in clients’ estate plans.
For the affluent, a pet trust is the best way to go, as Jason Smolen, estate planning attorney and founding principal of SmolenPlevy, in Vienna, Virginia, tells ThinkAdvisor in an interview.
He recommends that financial advisors routinely ask whether such clients own a pet and if so, proceed to suggest a pet trust.
Prominent celebrities’ pets often, and famously, inherit millions. When designer Karl Lagerfeld died this past February, he reportedly left his white cat a jumbo portion of his $300 million-plus net worth.
Real estate mogul Leona Helmsley left $12 million to her dog and nothing to two of her grandchildren. Subsequently, a judge ruled for the grandkids to receive a total of $6 million of the dog’s intended windfall, which was cut to $2 million.
Oprah Winfrey is said to be leaving $30 million to her family of five golden retrievers and spaniels.
Pets live in 68% of U.S. households, according to the American Pet Products Association. That number has been increasing because, among other reasons, many couples without children have pets; and the acquisition of comfort and emotional support animals has been on the rise.
With a pet trust, the owner appoints a trustee to take care of the animal and sets aside a defined amount of money specifically for that purpose. Without such arrangement — or at least, a designated bequest in a will — the pet may wind up in a shelter and could be euthanized.
In our phone interview, Smolen, named a Trailblazer in Divorce, Trusts and Estates by the National Law Journal, discusses when to fund a pet trust, as well as some unusual animals to which his clients have left money. A tortoise, for example. Pet tortoises can live to be as old as 100 — in tortoise years, that is.
Here are excerpts from our conversation:
THINKADVISOR: Pets are indeed precious to their owners.
JASON SMOLEN: For many people, these animals are their kids. I hate to say it, but to some, they’re more important than their kids. They’ve become very integral to the family. There are many households now without children but with pets. And owners want to take care of them [after they die] just the way they would take care of their children.
Is leaving money for a pet’s care becoming more commonplace?
It’s a growing trend. You don’t have to be part of the 1% to start thinking about this. If you don’t make arrangements for their care, some of these animals end up in shelters or pounds and are euthanized.
But can’t you just trust that a friend or relative will take care of your pet after you’re gone?
Yes. But frequently it’s been found that the animals don’t necessarily fare that well. So I recommend to almost everybody to [provide for their pet’s care] in a will or trust, depending on their circumstances. With a trust, you create a sub-trust for the purpose of giving directions for a pet’s care. That’s why we’re seeing more and more people creating trusts for their pets.
My understanding is that if you say in a will, “I leave X amount of money to my dog Spot,” for example, it has no legal standing.
Right. You have to leave it to a trustee for the benefit of Spot.
How do you go about creating a pet trust?
First, the pet owner needs to make sure everything is all in place beforehand and, especially, that the trustee is established. The owner creates the trust while they’re alive, but the trust would not come into play until they die.
What does one need to consider when naming the caregiver?
The most important thing is choosing somebody that’s willing to take the job. You really do need to give thought to whom you give that job.
What’s the process used to fund the pet trust?
Typically, following the owner’s death, the money goes into the trust for the benefit of their pet. So you need to put aside enough money to make sure that the person you indicate to care for the pet — taking it to the vet and so on — isn’t burdened economically. While the pet is alive, that money must be dedicated to the care of the pet.
What happens if and when the animal dies and there’s some money left over?
It would go to the caretaker or a family member [who has been indicated].
Can pet owners fund a trust while they’re still alive?
Yes; but if they fund it then, to some degree they’re dispossessing themselves of that money.
How did you get into estate planning for pets?
You have to go where your clients take you. I make sure that we discuss whether they have pets and if so, what arrangements they want to make for them. Most say they have a good friend or family that will take care of them. But an increasing number say, “Gee, I didn’t think about that”; and then they decide to make very specific plans to be sure whoever will be taking care of their pet isn’t burdened economically.
Where do financial advisors come into this scenario? Should they put this topic on their list of questions to ask clients?
Yes. They should incorporate into their questions one on what their clients wish to do. Advisors assist with how much someone can reasonably set aside for a pet trust, which is typically a sub-trust within a trust.
Ever create pet trusts for clients with unusual animals?
There have been horses, ponies, snakes, tortoises. The owners care a great deal about their animals — and snakes and tortoises live a very long time.
Any odd requests for pet care?
Some people make very complicated arrangements and requirements. For example, they want their pets to stay in a certain place, such as a horse housed in a particular stable and to have vet care a specific number of times a year. So some people get a bit detailed.
The stable matters a great deal, then?
Yes. Some stables have a certain reputation, or clients want their horses to stay stabled where they are. They don’t want to disturb the animal’s life by having them moved. You could dedicate your house to the care of a pet, so that the pet stays there. But, of course, you need the caretaker to continue to do that.
Any instance of someone you’ve helped who didn’t want their pet moved?
I have a client that has somewhat of a menagerie and has made arrangements for all the pets to be cared for in place [at the client’s present home]. The caretaker could move in, and that would be paid for.
Do pet trusts ever stipulate the owner’s wishes for reproducing their animals?
The trusts are effective for the life of the pet that exists at the time the owner [creates the trust]. That’s because you don’t want someone taking care of your pet with a pretty good gig to be able to perpetuate it forever by just having more pets. The way the trusts are written, in most states, you can create a pet trust; but [the caretaker] is not meant to start a business out of those pets and run it under the guise of a trust.
What if the owner thinks their dog or cat is so cute that once they’re gone, they want the pet’s traits passed on for a couple of generations?
I’m sure that can be solved for. But it wouldn’t necessarily be through a pet trust. The law [says] the pet trust isn’t designed to be multigenerational.
Suppose a person clones their pet and wants to provide for the clone, or clones, once they die. What issues would that present?
If the clone is alive at the time they die, the trust is very able to handle that. But [after the person’s death], if the [caretaker] creates more animals or is breeding animals under his or her care, those animals aren’t covered by the trust. That’s running a business.
Barbra Streisand cloned her dog, who died at age 14. She now owns two Samantha clones: Miss Violet and Miss Scarlet. In establishing a pet trust, would she specify their care in the same way she would for Samantha were she still alive?
Correct. The [clones] are alive. She created them during her lifetime. They’re her children, so to speak. So they can be cared for under a trust.
Pets can certainly be valuable to their owners.
Right. But it’s not the economic value of the pet. It’s the value of the pet to the owner.
You're a Widow, Now What?
Great story from the NY Times this past weekend (click link below).
The following article was from the Washington Post last weekend. I cut and pasted in its entirety. Credit to author.
Before you read this: ask yourself--if you are a grandparent, and you are taking care of your grandkid(s) because the parents are not available, what is the legal status of your relationship with your grandkid? You might wish to take full custody. Or otherwise change it.
Also--what does your estate plan (will, etc.) say happens to your estate? If it is destined for your kids, and they are not around, maybe you'd want to change it so your estate goes to your grandkids. But that presents its own set of challenges. Namely, are your grandkids so young that they would need an administrator for your estate? Confused yet? Call me. Lets chat.
How these grandparents became America’s unofficial social safety net
By Andrew Van Dam
March 23American grandparents have long raised their grandkids when their children are unfit or unable to do so. Many took over child care during the crack cocaine epidemic of the 1980s, especially among African American families.
Now grandparents are stepping up again, Census Bureau data shows. This time, the burden is largely shifting to low-income white families.
As the middle generation has been hollowed out by the abuse of opioids and other substances, the oldest generation has become increasingly responsible for their grandkids, experts say. It’s a responsibility that many didn’t expect and weren’t prepared for. Retired folks find themselves trading their sedans for minivans, moving out of their adult-only communities, and searching for work to cover the expenses that come with raising a child.
[The opioid crisis is straining the nation’s foster-care systems]
The shift tends to be sharpest in rural, mostly white states such as New Hampshire and West Virginia, which also ranked in the top three in substance-abuse death rates. These figures are for the five-year period ending in 2017, the most recent available. Death rates are reported by the Centers for Disease Control and Prevention. Synthetic opioids have hit black communities hard since then.
[Fentanyl drug overdose deaths rising most sharply among African Americans]
The weight the opioid crisis has placed on grandparents was made heavier by changes to the foster-care system, experts say, particularly the Fostering Connections to Success and Increasing Adoptions Act of 2008, which encouraged the placement of children with relatives.
The limited data available on the Native American population shows a large and rising share of grandparents in those communities are also taking care of grandkids. The fastest-in-the-nation increase in children being cared for by grandparents was in South Dakota and concentrated in counties with large Native American populations.
Meanwhile, grandparent caregiving of black children has declined as the share of black children living in poverty has fallen.
Statistics often focus on the number of grandparent caregivers, rather than the share of children who are cared for primarily by grandparents. These figures could be distorted by falling fertility rates and an aging population.
Parenthood without warningThe arrival of two preschool-age children upended Bette Hoxie’s life, even though, in theory, nobody should have been better prepared.
The 72-year-old from Old Town, Maine, northeast of Bangor, has raised more than 150 foster children. She has adopted at least eight children and given birth to three more. A national organization named her Maine’s 2018 Mother of the Year.
In 1997, the year her husband died, she helped found Adoptive and Foster Families, an organization that helps Mainers who care for relatives’ children. She was the group’s executive director until she retired in November 2017, in part to take care of her own grandchildren.
Less than a year later, she was back at the organization. She works as a kinship specialist so she can afford to care for her own kin, newly arrived under her roof.
“I sometimes think God has one heck of a sense of humor,” she said.
Hoxie said it has been more challenging to work with the foster system this time around. It’s worse for those who haven’t made it their life’s work.
[Grandparents raising grandkids grapple with retirement and college costs at the same time]
“Unlike traditional foster parents who typically plan and go through a series of trainings, and plan for months or years to take on the role of caring for an additional child, grandparents and other relatives typically step into the role of raising children with little to no warning,” said Jaia Peterson Lent, deputy executive director at the advocacy group Generations United. “They often get a call in the middle of the night, saying, ‘Pick up your grandchild, or they’ll go into foster care.’ ”
[This development is a refuge for grandparents raising children Is it a model for the country?]
Working grandparentsLittle about a grandmother’s work status, income or pension influences whether she’ll end up caring for her grandchildren, according to a 2015 analysis of the long-running Health and Retirement Study in the journal Demography by Robin L. Lumsdaine (American University’s Kogod School of Business) and Stephanie J.C. Vermeer (Roland Berger Strategy Consultants). Their work adjusts for differences in family characteristics and health.
“Care decisions are sometimes driven by the needs of the grandchildren’s parents, rather than the circumstances of grandparents,” Lumsdaine said. “The birth of a new grandchild increases the chances that a grandmother will provide care by nearly 70 percent.”
Retired grandmothers weren’t more likely to become caregivers, but grandmothers who became primary caregivers were 9.6 percent more likely to retire, Lumsdaine and Vermeer found. The researchers also found that about 10.5 percent of those retired caregivers would, like Hoxie, return to the workforce within two years — while still raising their grandchildren. Another 13 percent would stop caregiving entirely and return to work during that time.
About 95 percent of caregiving relatives work outside of the official foster system, according to Generations United. They often lack official financial, practical and emotional support.
In a 2013 analysis in Marriage and Family Review of caregivers in rural Montana, Sandra J. Bailey (Montana State University) and her collaborators found that “for many grandparents in our study, retirement became a distant or unreachable goal.”
Grandparents who had grown up in a culture of rugged self-reliance now faced a rise in food, transportation, heating and child-care costs beyond what many could handle alone.
“For grandparents still in the workforce or simply needing respite care, the cost of child care was shocking,” Bailey and her colleagues wrote. “Although many grandparents anticipated child care costs, the current rates were much higher than when they had parented the first time.”
The latest figures from the Census Bureau show the share of Americans age 65 or older living in poverty has remained steady, even as the rate among younger groups has fallen.
The silver lining? Research shows that compared with children in foster care with non-relatives, children raised by grandparents or other relatives are healthier, mentally and physically. They’re more likely to be kept together with their siblings and to report that they always feel loved.
Interesting Article on Divorce...
Ill say this again--if you are considering or have gone through a divorce and have not updated your estate plans, please do.
In the meantime, check out this article from England that includes quotes from a lawyer in the USA from Sodoma Law in Charlotte NC. No relation to our firm. Small world.
A Friend of Mine...
A friend of mine was in a car accident the other day. You can read more of her story on the link her family set up at GoFundMe. I knew this young lady during my 1L year of law school @ Regent. All donations to her recovery fund would be appreciated. At this point, she is lucky and blessed to be alive. It's a really bad situation, but she is recovering. Again, read the story and updates at the GoFundMe here.
What ARE We Doing All of This For?
What are we doing all of this FOR?
Did you ever have one of those conversations that changes your life? How about one that changes the way you look at things so drastically, that you just can't believe what happened during the course of the conversation?
One of my friends had a conversation like this recently. I talked to him about his experience the other day.
I had talked to my friend a while ago, before I had started my law firm, about preplanning for his accidental demise. He's a married guy and had recently had a child. We're talking on the phone and I am telling him about how everyone needs a will, an advance medical directive, and some other documents for himself and his wife. And that all the documents need to be updated to include his new kiddo. And that he had to do some things to set things up for the child, too--things like a trust, joint bank accounts, next-of-kin notifications, decide who was going to be the long term guardian, and all that jazz. And then I dropped a bombshell on him: I told him he needed to make sure everywhere his kid went for activities, or school, or things like daycare, that ALL those places had an emergency contact who could come get his child until the legal guardian got there and established control. I explained that if he and his wife dropped the kid off for a date night, and then they were both killed in a car wreck, the place where the kid was would have to notify the emergency contact who would literally DROP EVERYTHING and assume control of the children until the next of kin arrived.
It was like time stopped. He had not even thought of this eventuality. His kid's next of kin was an 8 hour drive away. His best friend (me!) was over 4 hours away. The gears started turning in his head, and he is working on planning for his estate--and his kid's immediate and long term care needs.
I mentioned earlier that I talked to my friend about a life changing conversation he had. This was with another friend of his. The other friend was in a similar situation. Married, young kid. My friend and the other guy were talking, and my friend mentioned that he was working on his estate planning. They chatted for a while, and the other guy mentioned how he was so busy that he hadn't had time to handle this huge task. This huge important task. He was too busy providing experiences for his kid: swimming lessons, math classes, kindergarten, and on and on. So many different things were going on and life was busy, and who has time to think about estate planning and dying? And my friend says:
"What are we doing all this for?"
He's right. We are so busy providing our children with an interesting life, and taking care of our own lives (have you checked your bank statement? finished your taxes? looked at your 529? paid that water bill?) that we never think--what are we doing all this work for? If you are working a 40- hour-a-week job, and saving up all your extra money, and doing everything right, and you are so busy providing experiences for your kid that you cant spend a half-day planning for what happens when you aren't around--what are we doing all this for?
I am not trying to scare you--just to make you aware. We can get a will done and some of the extra paperwork done to set you up with an estate plan in about the same time it takes for you to watch a football game (go Bills). In about the same time it takes you to do a yoga class and hit the coffee shop, we can help your kids make it into the future you are working so hard to provide them with.
Call me today.
Did You Make YOUR Video?
Do you have yours?
In support of NHDD, lifelong advocate and volunteer Micki Jackson in collaboration with PeaceHealth Medical Group are running an "I've got mine!" campaign to promote documentation of and conversations about end-of-life care wishes. Check out this short I've Got Mine! video. Read more about their campaign here.
Did You Write YOUR Letter Yet?
Isn't it Time to Write that Letter to Your Loved One?
National Healthcare Decisions Day (NHDD) is less than one month away! The Conversation Project (TCP) is encouraging everyone to write by snail mail or email to their near and dear. Write a letter to your loved one about what matters most to you. A letter is, after all, a great way to share our wishes for end-of-life care. TCP will be collecting as many letters as we can and hope to share different examples with you as we receive them. If you're willing to have us share yours, please send it our way (email@example.com). The first ten submissions will receive a TCP Talking Matters pin. Click here to learn more!
I Approve, In Theory...
GOP lawmakers offer paid parental leave legislation linked to Social SecurityBy Naomi Jagoda - 03/27/19 03:54 PM EDT 130
"Our proposal would enact paid family leave in America without increasing taxes, without placing new mandates on small businesses," Rubio said in a news conference.
Under the legislation, new parents would have the option to get early Social Security benefits for up to three months to finance paid parental leave. A fact sheet from Rubio and Romney said most parents below the median household income would be able to receive a benefit that would replace about two-thirds of their wages.
In exchange for receiving the paid parental leave benefit, people would either have to increase their Social Security retirement age by several months or get a reduction in their monthly Social Security benefits for the first five years of their retirements.
The legislation comes amid a renewed push for paid family leave from policymakers on both sides of the aisle, though Republicans and Democrats are taking different approaches in their proposals.
The draft legislation from Lee and Ernst would allow new parents to receive up to three months of paid parental leave in exchange for delaying collecting Social Security benefits by up to six months when they retire.
Republican proposals to link paid parental leave and Social Security are inspired by a proposal from the conservative Independent Women's Forum (IWF), which praised the legislation offered Wednesday.
"It expands access to paid parental leave in a fiscally responsible, fair, and flexible way," IWF President Carrie Lukas said in a statement. "It would modernize an existing government program that workers already pay into to allow them early access to benefits they’ve already earned."
Meanwhile, Democrats reintroduced their own paid family leave bill last month, which would allow people to take paid family and medical leave for up to 12 weeks and would be paid for through small increases in payroll taxes.
Supporters of Gillibrand's bill have criticized GOP proposals, arguing that people shouldn't feel like they have to choose between paid leave and receiving Social Security when they retire. They've also criticized Republican proposals for focusing solely on parental leave without also providing a benefit for people caring for a sick family member or dealing with their own illness.
"There is clear bipartisan agreement that we have a paid leave problem, but proposals like this fall far short of the policy solutions we need," said Brianna Cayo Cotter, chief of staff for Paid Leave for the United States.
Half of Older Americans Have Nothing in Retirement SavingsBy
Preparing Yourself for the 'Retirement Apocalypse'
The bad news is that almost half of Americans approaching retirement have nothing saved in a 401(k) or other individual account. The good news is that the new estimate, from the U.S. Government Accountability Office, is slightly better than a few years earlier.
Of those 55 and older, 48 percent had nothing put away in a 401(k)-style defined contribution plan or an individual retirement account, according to a GAO estimate for 2016 that was released Tuesday. That’s an improvement from the 52 percent without retirement money in 2013.
Two in five of such households did have access to a traditional pension, also known as a defined benefit plan. However, 29 percent of older Americans had neither a pension nor any assets in a 401(k) or IRA account.
The estimate from the GAO, the investigative arm of Congress, is a brief update to a more comprehensive 2015 report on retirement savings in the U.S. Both are based on the Federal Reserve’s Survey of Consumer Finances.
The previous report found the median household of those age 65 to 74 had about $148,000 saved, the equivalent of an inflation-protected annuity of $649 a month.
“Social Security provides most of the income for about half of households age 65 and older,” the GAO said.
The Employee Benefit Research Institute estimated earlier this month that 41 percent of U.S. households headed by someone age 35 to 64 are likely to run out of money in retirement. That’s down 1.7 percentage points since 2014.
EBRI found these Americans face a combined retirement deficit of $3.83 trillion.
Jeff Sodoma, MPA, Esq. is a lawyer based in Virginia Beach, Virginia
Hello, there! Welcome to my blog. I will use this blog as a platform for my writing. I will write about topics in the legal world, certainly, as well as everything else under the sun, because I have many interests (and viewpoints). All views expressed in this blog, unless otherwise noted, are mine alone. One of my interests is music--my wife believes that I should go on "Beat Shazam" because I know so many songs--and I will be, from time to time, analyzing song lyrics and how they relate to the legal world.