Many of us are animal lovers and non-human companions come in a lot of shapes and sizes. As we have noted in another section of our site, millions of New Yorkers have pets they love as much as (or perhaps more than) family. Understandably, it’s not unusual for pets to be named as beneficiaries of estate plans, but unless it’s done correctly, legal issues can arise.
The key stumbling block to ensuring the proper care of pets after the testator’s death often is that the testator thinks of them as family and the law considers them property. Because of that, simply naming them in a will isn’t possible. However, you can create a trust for your pet that sets aside a specific amount of money for such things as grooming, sheltering, feeding, and who will serve as the trustee to oversee all of those things.
Another potential hurdle: Taxes
Something else that can cause trouble for your plans is failure to take tax laws into account – both federal and state. Further, laws differ state to state, and where your treasured animal happens to reside could result in tax implications if you aren’t careful.
A case out of Pennsylvania serves as an example. New York has an estate tax on assets valued at more than $5.25 million, but it does not have an inheritance tax. Pennsylvania doesn’t have an estate tax, but does have an inheritance tax that applies at much lower levels.
In the matter at hand, a woman with an estate valued at some $410,000 set it up in a trust to cover the care of two horses, two dogs, two cats and some chickens. Upon receiving the estate’s final tax return, the state imposed an inheritance tax amounting to more than $61,000.
The executors challenged the assessment, saying that since the animals aren’t people under the legal definition, they couldn’t be subject to the tax. The court agreed the animals aren’t people, but said trusts dedicated to them are still taxable.
So, imagine you are a New Yorker with a horse stabled in Pennsylvania. You might set up a trust to see it’s cared for in the event of your death, and it might be wise to make adjustments to reflect the inheritance tax implications.