When we think of Estate Planning, we usually think of how and to whom our assets transfer upon our passing. We may also think of who will care for us and our minor children should we either die or become incapacitated. Very seldom will families design long-term plans for their pets. While many people may consider their pets to be part of their family, the IRS doesn’t consider pets a legitimate beneficiary for tax purposes. Therefore, finding a replacement caretaker for your pets may create complications in your estate plan.
The good news is, depending on your state of residence, you may be able include your pet in your estate plan. Certain states allow you to create a Trust to provide care for your pet’s lifetime. However, in doing so, there are many important factors to consider.
The first includes determining the needs for your pet including the type of pet and average lifespan, average cost of care for the pet, and the desired “residence” for your pet if you’re not around. The next step includes finding a willing individual(s) to care for the pet in the same way you would. In some instances, it is re-commended that you notify the potential caretaker(s) and list multiple options in the event some decline. The third step would be to determine the budget for the pet and how you plan to fund it.
These are the initial steps to providing care for your pet in your estate plan. Keep in mind trust assets are usually taxed at a higher rate than individual rates, therefore management of the trust assets to care for the pet may require additional planning and record keeping.