What happens to your best friend when you are gone?
The best friends we are speaking of here are our pets. The animals in our lives are our best friends, and they are part of our families. Tragically, thousands of pets are euthanized every year when the owner dies and there is no planning in place.
There are numerous planning methods available to pet owners who wants to ensure that their pets are cared for after their death. Provisions can be placed in an honorary trust or a power of attorney for the care and feeding of your pet.
Your best friends with four legs, fins, feathers or fur can be remembered in a will that provides for their care after their owners pass away.
What a person can do to provide for a pet depends on state law. But generally, you can prepare for a pet in three ways:
- A special power of attorney. This authorizes someone to spend your money to care for your pet if you become ill or disabled. The authority expires when you die.
- A will. Your will names a caretaker for your pet and provides financial resources for its care. However, you must be careful that the payments are not taxable to your chosen caretaker.
- A trust. This appoints a trustee (person or organization) and directs how to invest trust assets and to whom they should be distributed. You would bequeath the pet to the trustee, in trust, to deliver it to the appointee. Trust income taxes will be due by the person receiving the income. If the pet’s expenses are paid by the trust, it owes the taxes. The trust terms can be part of your will or in a separate document effective during your lifetime.
When the pet dies, the remainder is given to charity or any beneficiary of your choice. A trust should say where assets go after the pet dies. The Internal Revenue Service has ruled that this charitable bequest is not deductible because when it is given is indefinite as the pet’s date of death is unknown.