Why Rich People Set Up Trust Funds for Their Pets
A dachshund in New York is currently battling for a $100,000 trust fund. We asked a pet trust attorney why—and how—pets inherit their owners' riches.
Photo via Trading Academy Flickr page
Somewhere in Manhattan, there is a seven-year-old dachshund named Winnie Pooh with a $100,000 trust fund. The trust was set up six years ago by Winnie's late owner, Patricia Bowers, who wanted to ensure there was money to care for little Winnie. But last week, the pup's caregiver filed a lawsuit alleging she's received almost none of the money from the executor of the estate, forcing her to pay out-of-pocket for Winnie's expenses, including an emergency orthopedic surgery last year.
The ensuing legal battle over a dog's trust fund is a little eye-rolly, sure, even if Winnie's caregiver has the right to the money. And while most of us can't relate to having a six-figure trust fund, let alone leaving one to a dog, there is a takeaway in this whole mess: If you have money, you can set some of it aside to make sure your pet is taken care of after you die, which is a pretty nice thing to do for the only living being that ever truly loved you.
The most famous case of a dog trust is the one set up by real estate mogul Leona Helmsley, who died in 2007 and left $12 million for the care of her Maltese, Trouble. (Later, a judged ruled that the amount was excessive and gave $10 million to charity.)
Another socialite, Gail Posner—daughter of the guy who invented "hostile corporate takeovers"—left $3 million and a house worth $8.4 million to her three dogs after her death. Her son, who was left $1 million, disputed the will immediately, claiming conspiracy by Posner's staff, who received a total of $27 million to, among other things, take care of the dogs.
Apparently, leaving your riches to your pets—for their well-being, and maybe also to spite your family—is widely practiced among well-off pet owners. So I reached out to Gerry W. Beyer, a law professor at Texas Tech and pet trust attorney (yes, that's a real thing) to find out how it's done.
This interview has been edited for length and clarity.
VICE: OK, so how does this work? Do I like, go into a bank and ask them to open an account for my dog?
Gerry W. Beyer: In the United States, pets are deemed as property, so you don't actually leave money to the animal. Instead, you leave money in a trust, managed by a trustee, for the benefit of the animal. Normally you will have a human caregiver, who is the beneficiary, who receives money for the pet's care, and then you have a trustee to make sure that the animal is properly taken care of.
What if I don't get one? What happens to the pet?
They just pass through the will with everything else, or if you don't have a will, it'll pass by intestacy. In many cases, the pet just ends up at the pound, or the shelter, and they may not make it very long if they're there. Many people do not realize that there are simple techniques available to protect their pets.
So how is a pet trust different from just writing "everything goes to my snail, Rocket," in my will?
The deal with creating a pet trust is you want it to be legally enforceable, so you can make certain that that money is actually used to take care of a pet. In a "traditional pet trust," you tell the trustee to help the person who is providing care to your pet after you die by paying for the pet's expenses according to your directions [as well as specifying how much is paid per year and what the money can be spent on]. What you're describing is a "statutory pet trust," which is just a provision in a will. It doesn't require the pet owner to make as many decisions regarding the terms of the trust. Usually, the state will fill in the missing parts to a pet trust, making sure the money is spent on the pet.
That sounds easy enough.
It's a very primitive method and not one I would recommend, unless the estate is small. You'd sooner want a "traditional pet trust" where you actually name the caregiver of the animal, the person holding the money, how much to reimburse for expenses, plus an additional amount to "encourage" their help. The trustee would also make random inspections at the caregiver's home to make sure the animal is well treated. You're not relying on hope or trust; you're relying on a legally enforceable obligation.
What if the animal outlives the caregiver, or the money runs out?
The normal thing to do is to provide alternate caregivers in the trust. Even if you don't provide alternates, it would be wise to pick a method of picking an alternate. Obviously if the money runs out, you're basically out of luck. Hopefully someone would take care of the animal out of the goodness of their heart, but if you put too little in, then there's that risk of running out of money.
So what is a reasonable amount to put in? Some websites I looked at suggested between $15,000 to $20,000.
That's going to depend very much on the type of animal, the life expectancy of the animal, and the type of care you want the animal to have. If your dog is already 14 years old, or if you're setting up a trust for a hamster or gerbil, well, you're not gonna need that much unless you want to put aside a lot of money for extreme medical care.
One of the big types of animals that get a lot of pet trust activity are parrots, because parrots can live up to 100 years. You'd need to plan for caregivers who aren't even born yet. In that case, you can just put in money—say, $100,000—and that money is spent taking care of the pet. But some people put in enough money to generate interest and income, and the pet can live off that income. Plus, I've heard of people spending $5,000 and more for medical care if the animal becomes ill or gets hit by a car or something, and that can upset the funding quite a bit.
What are some of the larger pet trusts for?
I've read and worked on cases that range anywhere from the high hundreds of thousands to low millions, and that's obviously for animals that have intrinsic high value or live a long life, like parrots, racehorses, purebred dogs.
Is there a limit to how much money you can leave your pet? The $12 million Leona Helmsley tried to leave her dog was knocked down to just $2 million, and the rest went to charity.
Virtually every state that has authorized pet trusts has said that if the amount given to the pet trust is "unreasonably large"—although the definition of that is a matter of opinion—they can have an amount removed from the pet trust, and then it just passes as though the animal had already died. When that does happen, most of the money usually goes to a charity, and the rest goes to family. It is very rare of course. Helmsley yes, that got a lot of press, but that is exceedingly rare.
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