Governor Linda Lingle recently approved a new law which allows us to make a trust for the care of our pets. Such a trust is valid if made on or after June 24, 2005. The new law gives some rules that apply to trusts for pets.

Many pet lovers love their pet as much as a parent loves a child. A pet lover wants to be sure that a beloved animal is given proper care. When the owner is gone, a pet cannot provide for its own food and care the way an adult human being can. Therefore, this new law is very appropriate.

Contrary to some newspaper headlines, the new law does not allow pets to “inherit” assets. Instead, it allows a trust to provide for the care of your pets for as long as they live. There must be a trust created for the pets. A simple will is not sufficient. There are three common ways to create a trust. First, you can create a Revocable Living Trust, which you can change at any time until you pass away, at which time it becomes irrevocable. Second, you can create an Irrevocable Trust, which cannot be changed or canceled, but which can protect assets from nursing home costs. Third, you can create a Testamentary Trust, which is an irrevocable trust created by your will after you pass away. Apparently, any of these three methods can be used to create a trust for pets. It would be wise to discuss with an estate planning specialist the advantages and disadvantages of each kind of trust.

If you do create a trust for pets, the trust needs to spell out whether the trustee will be paid. Normally, if a trust does not say how much a trustee will be paid, the law provides a formula to calculate how much the trustee can charge. However, the new law regarding trusts for pets provides that the trustee will not be paid, unless the trust document says so.

The trust funds may be used for the “care, maintenance, health, or appearance” of the pets. Apparently, the trust funds may be used for food, other supplies needed for proper care of the pets, veterinarian services, and grooming services. If the court determines that the amount of assets in the trust “substantially exceeds” the amount needed for the care of the pets, the court may cause the excess amounts to go to the persons who are to inherit the balance left after the death of the pets.

Actually, the new law is not only for pets, but for “designated domestic or pet animals.” It appears that the trust could be for a herd of cattle or sheep, for chickens, or other “domestic” animals.

Unfortunately, as with many laws, this law creates a number of unanswered questions. 1) Can the trust provide for the care of animals which are not yet born? Although I am told that the legislature intended the law to apply only to animals living at the time of the death of the owner, the written law does not say that. It does say that a trust for pets is exempt from the Rule Against Perpetuities, which is a law that states the maximum time limit before a trust must end. Therefore, is it possible that a trust for your pets and their descendants could last forever? 2) Can the trust provide for payment to the person who takes care of the pets? 3) Can the trust or a combination of trusts provide that the pets and their caretaker will be permitted to live in your house for the rest of their lives?

In spite of the unanswered questions, this is a good law which will help bring peace of mind to many pet lovers who have been concerned about the future care of their pets. If you have already provided for your pets in your trust or will, it would be best to make a new trust that complies with the new law.

This written advice was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. (The foregoing legend has been affixed pursuant to U.S. Treasury Regulations governing tax practice.)

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