< Back

Understanding Obscure Trusts: Pet Trusts

Kathryn Van Eeuwen

June 15, 2020


Introduction

As the landscape of the corporate fiduciary world continues to evolve; and as the demands to increase revenue continue to mount; trust companies may be tempted to expand their offerings and venture into less well-known areas of trust administration.  Although there can be economic benefits to engaging in obscure trusts; it is wise to understand some of the pitfalls that might also occur. In this article, we examine the pitfalls and questions to ask when drafting Pet Trusts. 

Understanding Obscure Trusts: Pet Trusts 

Although surveys differ, up to 68% of households in the United States are thought to contain one or more animal considered to be a pet. [1] And it doesn’t take an overly astute observer to notice that many pet owners consider their pets to be more than animals.  Rather, they are members of the family. And like other loved ones, many Americans want to ensure that their furry, feathery, or scaly friends are cared for should the owner die first. 

State Laws

Currently, all fifty states and the District of Columbia have some type of Pet Trust Statute. Minnesota was the last to enact one in 2016.  The Minnesota statute allows for the pet trust to be in existence until 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. Notwithstanding the foregoing, the trust may not be enforced for more than 90 years. [2]   

The length for which Pet Trusts are allowed to remain in existence varies from state to state.  Many state statutes simply require trusts to terminate with the last surviving animal passes away.  Others, like the Minnesota statute, cap the trust term by a certain number of years.  Some limit the trust to twenty-one years, such as Alaska [3] and Michigan [4], while others go out much longer. For example, the State of Washington applies its general rule against perpetuities which is one hundred fifty years following the effective date of the instrument. [5]

The limits on duration imposed by statues that define a specific number of years can create a problem when it comes to Pet Trusts. What happens if someone in Michigan creates a trust for a young cockatoo? Cockatoos generally have a lifespan of sixty years. However, in captivity they can live much longer. For instance, Fred, a sulfur-crested cockatoo in Tasmania, Australia lived to be at least 104. Not to be out done, Cocky Bennet, another Australian cockatoo, also of sulfur-crested variety, reported lived to be 120. [6] And cockatoos aren’t the only exotic animals kept as pets with a lifespan that wreaks havoc with perpetuity limitations. Henry the tuatara, a New Zealand reptile that closely resembles a lizard, was at least 120 years old in April of 2019 and is presumably still going strong. [7] But Henry is nothing compared to Jonathan, the giant tortoise. As of this past April he was a whopping 187 years old and designated as the world’s oldest living land animal by Guinness World Records. [8]   

How much is too much?

Matter of Abels, 44 Misc. 3rd 485

OPINION OF THE COURT

ANTHONY A. SCARPING, S.

In this miscellaneous proceeding, Richard M. Copland (Copland), as co-executor of the estate of Lenore Lewis Abels (the decedent), petitions the court for a decree in accordance with EPTL 7-8.1 (d) reducing the amount of money to be transferred from the estate to the trustees of a testamentary pet trust established under the decedent's will. Issue has been joined, and a stipulation was entered into between the interested parties which provides that discovery is waived, and the matter is to be submitted on the pleadings.

The decedent was married to Joel Abels (Joel), and they lived at 22 Normandy Lane, New Rochelle, New York (the home). They had a daughter who predeceased them on August 8, 2000 at the age of 46 years.

On February 16, 2003, the decedent executed an instrument which provided $115,000 in cash bequests to various charities for the care of animals and the rest of her assets in trust for Joel. If Joel did not survive her, all of her property (with the exception of the home) was to be sold and distributed to her named trustees to be used as follows: $35,000 in salary and a $5,000 bonus per year to Eugenia Chodnicka (Eugenia) (who was the decedent's housekeeper); funds were allotted for Eugenia to maintain the home and care for her cats;1 and when the last cat died, the home and its contents were to be sold, and the remainder distributed to 33 animal oriented charities in the percentages set forth in the instrument plus a $50,000 bonus to Eugenia. On that same day, Joel executed an instrument, which other than certain different general bequests, contained the same pet trust with remainder to charities if the decedent should predecease him.

On January 24, 2007 Joel died. Sixteen days later, the decedent died. On August 13, 2007 letters testamentary and letters of trusteeship issued in Joel's estate to Copland and co-fiduciary Michael Maino (Maino) (collectively, the co-executors), and on October 15, 2007 letters testamentary and letters of trusteeship issued in the decedent's estate to Copland and Maino. An inventory of assets filed in 2007 reflected assets in the decedent's estate totaling $4,761,346.2

Copland filed this proceeding and then an amended petition. His amended petition requests that the court (1) reduce the amount to be transferred to the trustees to either $440,000 or $1,000,000 minus $628,000 (the amount already expended) for an amount of $372,000 and (2) permit the sale of the home. In support of his amended petition, Copland asserts that the co-executors have been fulfilling the terms of the trust with estate funds because funds have never been transferred to the trust for the life beneficiaries. As to the decedent's cats, he alleges that Gindy is seven years old and can be expected to live another 5 to 11 years, and Poke-A-Dot is nine years old and can be expected to live another three to nine years. Copland also states that the home needs significant repairs, the taxes and upkeep on the home are very expensive, and Eugenia has indicated a willingness to leave the home and have the co-executors find and pay for a suitable new place for her and the cats to live.

In response to the amended petition, Maino filed an amended answer, containing a host of extraneous information and then generally admitting most of the allegations and requesting that the court grant the relief requested by Copland.

People for the Ethical Treatment of Animals (PETA), Bide-A-Wee Home Association, Fund for Animals and Doris Day Animal League, several of the charitable trust remainder beneficiaries, filed an answer which denied knowledge or information sufficient to form a belief as to the bulk of the allegations in the petition and asserted an "affirmative defense" which stated that, while the petition alleges that the estate assets exceed $3.6 million, it fails to set forth the liabilities and assets on hand, making it impossible to determine what would remain in the estate should the proposed reduction be granted and that the co-executors have failed to file state and federal tax returns. The pleading further prays that the court make a determination in the proceeding.

Eugenia filed an answer generally denying the allegations in the petition. She also asserted various "affirmative defenses" which included that the petition is based on misinformation that an agreement is in place for Eugenia to relocate with the decedent's cats and the co-executors, having failed to timely file tax returns, are now hoping to reduce the pet trust so that the taxing authorities might consider a charitable deduction, thus perhaps minimizing tax liability. The answer further requests that the court deny the petition.

As a preliminary matter, in every proceeding before this court, the clear expression of the decedent's intent is to be given effect (see Wager v Wager, 96 N.Y. 164 [1884]). EPTL 7-8.1 (a) authorizes the establishment of a trust for the care of a pet animal and the use of principal or income to be enforced by an individual designated for that purpose in the trust instrument or, if none, by an individual appointed by the court. The McKinney's Commentary to the statute provides that, prior to its enactment, New Yorkers had to provide for their pets in less ideal ways which would not always insure that their wishes would be carried out regarding their animals. For example, a pet owner could give money to a person with an unenforceable request that he care for the pet, he could make a gift to a person contingent on his care of the pet, or he could give the pet and money to a humane society (Margaret Valentine Turano, Practice Commentaries, McKinney's Cons Laws of NY, EPTL 7-8.1). The statute also provides that a court may reduce the amount of the property transferred to a pet trust if the court determines that the amount substantially exceeds the amount required for the intended use (EPTL 7-8.1 [d]).

Copland argues that the pet trust can be reduced if the home is sold, and Eugenia moved to a less expensive residence. Copland arrives at a sum certain by approximating the life expectancy of the cats and Eugenia's monthly costs to take care of them.3 He urges that this would be beneficial because the remainder of the trust would then be accelerated, the estate could possibly qualify for a charitable trust exemption, potentially reducing estate tax liability, and dispositions could be made to the 33 charitable remainder beneficiaries rather than when the last cat dies. He further argues that the reduction is necessary to meet the decedent's wishes to benefit the charities as well as her cats.

In actuality, Copland's prayer casts aside the decedent's wishes. The decedent gave very specific instructions as to how she wanted her cats to be cared for. That care included Eugenia, her home, a salary and bonus to Eugenia, maintenance for the home and a stipend for the cats.4

Furthermore, after the decedent's daughter and her husband predeceased her, her instrument makes clear that the primary object of her bounty became her cats (and not the charities). If she had wanted to dispose of her assets to give more money to the charities right away, she could have. Indeed, she gave $115,000 in cash bequests to the charities (including $25,000 to PETA). The face of the instrument makes plain that she knew that choice was available to her. She also could have chosen a less expensive option for the care of her pets. But she did not. Instead, as evidenced by article FIFTH of her will, she painstakingly planned out the care for her pets and set forth that the charities were to take only on the death of her last cat. Again, if she intended to benefit the charities over her pets, and create a charitable deduction, the instrument would have been drafted differently.5

In essence, Copland is asking for this court to rewrite the decedent's will. The court may not override the expressed intention of a testator (see Matter of Knapp, 41 Misc.3d 1202[A], 2013 NY Slip Op 51556[U] [Sur Ct, NY County 2013]; Matter of Kastin, NYLJ, Aug. 1, 2013 at 30 [Sur Ct, NY County 2013]). Similarly, the very purpose of the statute was to provide certainty to a pet owner regarding the care of her animals. Given the existence of the statute and the facts present, the court could not sanction the premature termination of this trust.

Additionally, Copland's petition is largely speculative. There is no guarantee that Copland is correct in his estimates as to the life span of the cats 6 or his assessment as to the cost of alternative living arrangements for Eugenia and the cats, there has been no determination made on the accuracy of the assets and liabilities in this estate, and there is no guarantee that the IRS will agree that the estate will qualify for a charitable deduction.

Indeed, Copland offers no authority for the proposition that the IRS would offer a charitable estate tax deduction based on the facts present here where (1) the estate is seven years delinquent in filing a return and (2) there has been a de facto formation of the trust since the life beneficiaries have been receiving benefits for seven years.

Matter of Helmsley, (31 Misc.3d 1233[A], 2009 NY Slip Op 52802[U] [Sur Ct, NY County 2009]), cited by Copland, had a very different set of facts and is distinguishable. In Helmsley, the pet trust was reduced from $12 million to $2 million because the trust was overfunded for the carrying out of the decedent's wishes. Unlike Copland's prayer for relief here, the petitioner in Matter of Helmsley did not seek to alter Mrs. Helmsley's wishes and arrangements for her dog, Trouble. Simply put, Mrs. Helmsley had made a disposition to the trust greater than what was required to carry out her intentions.

This matter is more akin to Matter of Duke, (NYLJ, Aug. 6, 1997 at 24, col 6 [Sur Ct, NY County 1997]), which was decided prior to the enactment of EPTL 7-8.1, which fact makes the case at bar even stronger against the reduction. In Duke, the court upheld the validity of a trust under Ms. Duke's will for the benefit of her dog against a challenge by the Doris Duke Charitable Foundation, the residuary beneficiary of the estate, to invalidate it. In doing so, the court stated:

In reaching the foregoing conclusion, the [c]ourt is cognizant of the tax and non-tax savings that would accrue to the Doris Duke Charitable Foundation if the trust were held to be invalid; the willingness of the Doris Duke Foundation for the Preservation of Endangered Wildlife and the Doris Duke Foundation for the Preservation of New Jersey Farmland and Farm Animals to care for the dog; and the possibility of future litigation arising with respect to the trust. These factors, however, cannot justify invalidating an otherwise proper disposition. (Duke at 25, col 1; see generally Matter of Kastin [refusing to apply anti-lapse statute and thus disinheriting children of predeceased sibling where decedent's intent from plain language of instrument was clear, and objective was to identify and honor testamentary intent, and not further societal benefit].)

Based on the above, the prayers for relief requested in the amended petition are denied in their entirety.

Case Notes
1. Copland alleges that, of the several cats which belonged to the decedent at the time of her death, only two remain.

2. In his petition, Copland alleges that the value of the estate at the decedent's death was $3,600,000 and that the home is worth about $300,000 to $500,000. On the inventory of assets, the home was valued at $1,000,000.

3. In a conference before the court, there was also a suggestion made that Eugenia could return to Poland (her homeland) with the cats.

4. One commentator has noted that planners often recommend that testators place their residences and farms in trust to properly care for the animals and to insure a vehicle for their intention that the "animals remain together in familiar surroundings" (see Frances Carlisle, Helmsley's Pet Trust Raises Issues for Owners of All Income Levels, NYLJ, May 28, 2009 at 4, col 3).

5. This same commentator has said that the "primary concern of a client when creating a pet trust is usually the animals and not the remainderman" (see Frances Carlisle, Remember the Family Pet in Estate Planning, NYLJ, July 16, 2004 at 5, col 3).

6. If the cats live longer, there may be increased financial burdens on Eugenia which the decedent did not contemplate. [9]

Which pets are the beneficiary?   

Hahn v. Estate of Stange, 2008 Tex. App. LEXIS 1027

Procedural Posture

Appellant designated caretaker challenged the judgment of the Probate Court No. 2 for Bexar County, Texas, declaring that all of the testatrix’s real and personal property passed to the residuary beneficiaries under her will, in the action with appellee estate administrator.

Overview

The administrator filed a declaratory judgment action to determine the beneficiaries under the testatrix’s holographic will.  The probate court determined that the will created a pet trust for the benefit of the testatrix’s cats, but that the pet trust failed because there were no ascertainable beneficiaries.  The probate court also determined that the designated caretaker for the cats was not a beneficiary under the will because his health issues prevented him from carrying out the purpose of the trust.  The probate court found that the designated caretaker’s heath issues rendered him unable to stay in the home and care for any cats.  The appellate court ruled that there was sufficient evidence to support the finding of the probate court, that the pet trust failed because no beneficiary cat was identified or located, as none of the testatrix’s cats could be accounted for.  Also, because the testatrix’s will made it clear that the primary purpose of her estate plan was to provide above all for the care of the cats, the will was not ambiguous about the creation of the trust. 

Problems with who will care for the pet?

What happens when the designated caregiver says “no”?

Although the pet trust created by Leona Helmsley for her Maltese named Trouble was infamous for many reasons, one of the less publicized facts concerned the caregiver. Mrs. Helmsley appointed her brother to care for Trouble, but he refused to accept the role.  Luckily for the dog, Carl Lekic, the general manager of the Helmsley Sandcastle Hotel in Sarasota, Florida accepted the role. [10] 

What does the trustee do when the trust fails to name a caregiver?

Examples of the good and the bad

i.The Good - Taffy the Cat

The trustee shall set aside the some of $100,000.00 for the loving care and maintenance of my loving cat, Taffy.  I recommend my trustee pay an amount up to $500.00 per month as a gift to the caretaker of my pet, to include food, shelter, medical care and such other necessaries as pet ownership requires. Further providing:

Taffy, be delivered to the possession of my friend and personal caregiver, (specifically named person), to care for Taffy as her own for the life of Taffy.  During such time as Taffy resides with the caregiver, I request that she provide Taffy with healthcare through (a particular animal hospital) on, at least, a semi-annual basis; and

If the caregiver shall be unable to provide such care, or if, for any other reason Taffy shall cease to reside in the possession of the caregiver, then, I recommend that my trustee seek the assistance of (specifically named veterinarians) to aid in placement of my pet with another home.

My trustee shall make inquiry from time to time form both the caretaker and the veterinarians concerning the well being of Taffy.

Upon the death of my pet, the remainder shall be divided among the residuary beneficiaries listed below.

ii.The Bad - Bridgett the dog

My Trustee shall retain in trust enough assets to take care of all of my pet(s) for the remaining portion of my pets’ life.  The amount my trustee retains in trust for the benefit of my pet(s) may not be challenged by anyone.  Any assets remaining after the death of my pets will be administered pursuant to the following section (Gifts to Charity).

Footnotes

[1] Kain Brulliard and Scott Clement, “How many Americans have pets? An investigation of fuzzy statistics,” The Washington Post, Jan. 31, 2019, https://www.washingtonpost.com/science/2019/01/31/how-many-americans-have-pets-an-investigation-into-fuzzy-statistics.

[2] Sec. 501C.0408 MN Statutes.

[3] AS 13.12.907.

[4] MCLS 700.2722.

[5] RCW 11.98.130.

[6] Zoe Miller, “11 of the oldest animals ever, ranked by age,” Business Insider, Apr. 23, 2019, https://www.elephants.com/news/the-sanctuary-in-the-news/posts/11-of-the-oldest-animals-ever-ranked-by-age.

[7] Ibid.

[8] Ibid.

[9] 988 N.Y.S.2d 458

[10] Cara Buckley, Cosseted Life and Secret End of a Millionaire Maltese, June 9, 2011, The New York Times, www.nytimes.com/2011/06/10/nyregion/leona-helmsleys-millionaire-dog-trouble-is-dead.