$61,000 for a parrot? Estate planning for pets
Diane Lucas hauls Greenbean, a winsome 25-year-old parrot, on a flight to Florida for their annual four-month escape from New Jersey's winter weather.
“You're a good girl,” Lucas says, as Greenbean cocks her head sideways at listless passengers peering into her cage.
Lucas, 64, received Greenbean as a gift from her husband when she was just a few months old and worries that her longtime pet and companion will outlive her because parrots can live to 80.
“I want to put her in my will,” she says, adding that she plans to speak with her financial advisor about it.
Lucas doesn't know exactly how much she'll leave for Greenbean's care, but a quick back-of-the-envelope calculation includes $1,350 annually for food and grooming expenses and veterinarian bills.
If Greenbean lives to 80, as expected, and the two spend another 10 years together, Lucas figures she needs to plan for 45 years of care, which means setting aside at least $61,000. That wouldn't include Greenbean's airfare to and from Florida each year and boarding expenses, which cost $15 a day.
Increasingly, pet owners like Lucas are turning to their financial advisors for guidance. They're asking questions about how best to plan for their pets, drafting detailed instructions for their care and leaving significant sums of money that depending on the animal can run into the millions of dollars.
UPSWING IN PET PLANNING
Marcia Urban, an advisor with Wells Fargo's Abbott Downing ultrahigh-net-worth wealth management unit and a financial planner for some 35 years, has seen an upswing in the number of people looking for help. Most, she says, are young, single individuals who have not yet settled down but are committed to their pets.
"Single people these days are very mobile in today's job market," she says. Because they're not yet attached long-term to any particular community, they're more likely to make formal arrangements for their pets because there's no one else to care for them should they die, she explains.
The rise in interest also stems from societal shifts that have resulted in people leading more isolated lives, say many advisors, estate planning attorneys and animal welfare experts. Observers point to the fact that more people today live alone or removed from families and communities that supported them. As a result, their pets are playing a much more important role as companions.
Indeed, the number of people planning for their pets is notable. More than four in 10 pet owners (44%) have made either written or verbal plans for the care of their pets, according a survey of 903 pet owners by Securian Financial Group. Of those with formal plans, 44% have made financial provisions for pet care, with the majority (73%) leaving a cash gift to their pet caregivers. Some also added pet caregivers as beneficiaries to their life insurance policies or purchased annuities with pet caregivers as beneficiaries.
For the uninitiated, planning for pets may seem straightforward but advisors doing the planning know that it involves much more than running projections as to how much money to set aside. Advisors can play a key role in helping clients choose a pet caretaker, explore funding alternatives and navigate the wide range of planning options available to them, from informal arrangements with family and friends to formal agreements spelled out in a pet will or trust. Clients can also opt to make arrangements online without the expense of hiring a lawyer.
Whichever way they go, the planning can easily go off course even for people able to afford top-notch lawyers. Think Leona Helmsley. Even though the real estate heiress left $12 million in a trust for her Maltese, Trouble, a judge later reduced the amount to $2 million, ruling that $12 million was excessive.
Anne Bedinger, a Raymond James advisor in Boca Raton, Florida, makes it a point to discuss pets with her clients as a matter of course. She discusses financial risks pet owners face, such as pet cancer, which can cost thousands, as well as legacy planning.
“They’re part of the family,” she says. “If you care about them and you want to make sure they're taken care of, you have to have a contingency plan for them or else they end up at the Humane Society.”
One of Bedinger's clients recently made arrangements with a neighbor to take his dog, Annie, should he predecease his dog. But he declined to make formal arrangements, opting instead to set aside money in an IRA, annuity or life insurance policy for the neighbor at some point in the future.
The neighbor readily accepted the responsibility for taking Annie, a five-year-old Shi-Tzu and Yorkshire terrier mix who as a certified therapy dog helped comfort the students at Marjory Stoneman Douglas High School in Parkland, Florida, after the Valentine's Day mass shooting.
Selecting a guardian for a pet as Bedinger's client did for Annie is a cornerstone of a plan, says Christina Gustin, a wealth advisor with UBS in San Diego. She encourages her clients to talk to potential candidates and make sure that they want to play this role. "The last thing you want is your pet to end up in the hands of someone who doesn't want the job or has never cared for an animal before," she says.
Gustin also advises her clients to talk to them about the financial arrangements they've made, saying that "might help them feel much more relaxed about being their pet's caregiver."
WHO TO TRUST
Some people, however, are not entirely comfortable leaving money with future caretakers as there's no fail-safe way to ensure that they will spend the money as they're supposed to, even when formal trusts are established. Indeed there have been situations where caretakers replaced the pets once the original ones died in order to keep receiving funds under trust funds set up for them.
"It's amazing what people will do when there's money involved," says Debra Vella, an estate planning attorney with Vella Law in San Diego.
Estate attorneys encourage their clients to identify their pets through microchipping, a process by which a tiny microchip containing a pet's unique ID number is inserted under its skin. "All black cats look like black cats," says Vella. "If you got a bunch of money thats set aside for this particular black cat, you want to make sure that whoever is taking care of the cat isn't substituting in new black cats over time to keep the money flowing."
Pet owners can help avoid this problem by designating both a pet caretaker and a trustee or distributor representative, a person responsible for distributing the money to the caretaker over time. The individual managing the money has a fiduciary obligation to the pet to make sure the caretaker is providing care for the right pet and consistent with the instructions left in the trust by the pet owner, says Peggy Hoyt, a Central Florida estate planning attorney, pet enthusiast and host of a weekly podcast, "All My Children Wear Fur Coats."
For an added layer of protection, pet owners can set up an "animal care panel," a group of veterinarians and other professionals who check in on the pet to make sure it is cared for in the way it was intended.
Such arrangements, however, can be challenging to set up. "You have to have a deep bench of people to fill all these roles to get this to work flawlessly," says Vella.
Safeguards and enforcement measures are nevertheless important, particularly when fortunes and elaborate instructions are left in trust funds for pets. One of Hoyt's clients, for example, made arrangements for his cats, dogs and birds to go to a perpetual care facility in Texas. The client specified the size and types of cages to be used for their transport, named the people to accompany the pets and instructed that the animals fly on a chartered airplane to avoid the rigors of a commercial flight.
LEAVING HOMES TO PETS
Some people leave their retirement savings and investment accounts in pet trusts, with an increasing number lending their homes to caretakers, sparing pets the need to adapt to unfamiliar residences.
"Many, many people leave their house for their animals and caretakers to live there together," says Rachel Hirschfeld, a prominent pet trust and animal welfare attorney.
Hoyt is among those making such live-in arrangements. Like a number of her clients, Hoyt is leaving her home and all of her assets in a pet trust for the benefit of her pets until they are all deceased. She appointed a pet guardian to take care of her three horses, three cats and eight dogs, and named back-up guardians. She also designated a trustee who will manage the money and make appropriate monetary distributions for the benefit of her pets and pet guardians.
In addition, she established two pet care panels one for her cats and dogs, and another for her horses. "These pet care panels are made up of individuals and veterinarians that I trust for the particular animal type to provide guidance to my pet caregiver and trustee regarding emergency, extraordinary and terminal care for my pets so that responsibility does not fall only on the shoulders of the pet caregiver," she said.
When leaving homes to caretakers in a pet trust, Vella urges caution. “You want to be especially careful that you know the animal is identified because there’s a pretty strong incentive for the caregiver living rent-free in this nice house to keep an animal in there to provide care for."
While most pet owners would like to appoint a person to care for their pets, not everyone is able to find suitable caretakers. In such cases, people typically bequeath their pets to pet sanctuaries. Kathy Rooney, 69, left $40,000 for her two cats, Imp and Sweet Pea, in a pet bequest program with the animal welfare nonprofit Helen Woodward Animal Center in Rancho Santa Fe, California. The nonprofit will “re-home” the cats with appropriate families and will care for them for as long as it takes to find them a proper home.
Rooney worried about who would take care of them because all her friends —all seniors — were unwilling to care for elderly cats, and her sister wasn't a pet lover in the same way she was.
"I felt when I die, they will be well taken care of. They could find good homes so they wouldn't be euthanized," Rooney said.
Helen Woodward's pet bequest program requires $20,000 for each cat it takes in over the age of six. Cats under three cost $5,000, while those between three and six cost $10,000. Younger cats cost less because they're easier to adopt than older cats.
Rooney adopted Imp and Sweet Pea, both nine, when they were just two months old from Helen Woodward. Imp — “a rascal," she says — is "dark gray with light gray streaks running through" and Sweet Pea — a "fluffy Calico on the pudgy side" — has been on a diet for three years but hasn't lost an ounce.
"They add a lot of enjoyment to my life, especially since I'm single and I live alone. They're also companions and they don't talk back — well most of the time they don't," Rooney said.
Helen Woodward provided Rooney with simple language to put into her estate documents. “The lawyer did it in two minutes," she said.
ONLINE PET TRUSTS
Most people incorporate financial arrangements and instructions for their pets into their estate planning documents often with lawyers drafting up individual pet trusts that can cost up to $30,000. But now pet trusts are available online and within reach of almost anyone.
Hirschfeld, for example, created an online pet trust that she claims is enforceable in all 50 states for just $25. It does everything a customized trust does but avoids all the problems, she says, explaining that trusts written from scratch by attorneys are valid only in the state in which the attorneys are licensed.
The online pet trust allows pet owners to appoint a caretaker as well as a distribution representative, if they so choose, and to specify instructions for their pet's care, Hirschfeld says.
Since the pet protection agreement pet trust launched in 2000, "hundreds of thousands" have been sold, with the average amount placed in them totaling $25,000. Some are funded with amounts ranging from $20 million to $35 million.
"It took 15 years to write the darned thing," she said of the online pet trust, a labor of love as much for her late dog, Soupbone, as for people without the resources to pay an attorney.
If she did "only the rich and wealthy," she says, she wouldn't be able to help "little animals whose masters want to protect them and can't because they couldn't afford her."
Once the highest-paid pet trust attorney in the country, Hirschfeld nevertheless still has people waiting in line to pay her $30,000 for a pet trust. She does only five a year.
"I'm too busy trying to get animals into nursing homes and ambulances so people don't leave them on the street," she says. "That's the kind of work I really like to spend my time on."