Basic Estate Tax Planning For Married Couples: Opportunities For Use Of Estate Tax Exemptions
June 23, 2023
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Pets are not just animals, they are cherished members of our families, providing unconditional love and companionship.
That is why, as responsible pet owners, it is our duty to ensure that our beloved furry friends are cared for even when we are no longer able to provide that care ourselves. Estate planning for pets is a crucial aspect that often gets overlooked. In this article, we will explore the importance of planning for your pets' future and the steps you can take to secure their well-being.
Understanding the Need for Pet Estate Planning:
Your estate plan determines the distribution of your assets at death, but our pets are more than just property. Without proper planning, pets may end up in shelters or with individuals who may not understand or be equipped to meet their specific needs. Planning for your pets' continued welfare – by considering who will watch over them and establishing the proper funding for their care – is a critical element of any estate plan.
Owning pets can be very expensive, and it is always worth it for those of us who love our furry friends. But if we become unable to care for our pets, will someone else be willing to bear those costs? Owning even just one dog can cost up to $5,000 per year. Assuming your dog might live at least 5 more years after your death, you might be uncomfortable making an outright distribution of $25,000 to its future caretaker in hopes that the caretaker uses that money wisely. This number grows even larger for pet owners with pets that can live very long lives, such as horses, turtles and parrots. A pet trust can mitigate these fears by requiring annual or monthly distributions of a certain amount that will be used only for the care of your pet.
Caring for our pets can also be time-consuming, and we are happy to do so with the unconditional love only our pets can return. But will that be the case for our pets' caretakers who succeed us? A simple provision in a pet trust can provide for compensation of a pet caretaker to add an incentive to care for our pets properly.
Key Components of Pet Estate Planning:
1. Identify Caretakers
The first (and sometimes hardest) step is identifying suitable caretakers for your pets. This involves considering individuals who are willing and able to take on the responsibility of caring for your pets in the event of your incapacity or death. Communicate with potential caretakers and ensure they are comfortable with the responsibilities involved.
2. Legal Documentation
Establish legal documentation to solidify your wishes for your pets. A pet trust is a legally recognized document that designates funds and instructions for the care of your pets. This ensures that the financial aspect of their care is taken care of and that the designated caretaker follows your specific instructions regarding your pets' well-being. A pet trust can be created by your Will or by a Trust Agreement.
North Carolina General Statute § 36C-4-408 expressly outlines the rules surrounding pet trusts, including what happens when our pets are gone. The pet trust will terminate at the death of the animal, or the last surviving animal if you have multiple pets to care for. Upon termination, the Trustee is directed to transfer the unused funds in the following order: (1) as directed in the Trust Agreement; (2) if the trust was created by your Will, as directed in the residuary clause of your Will; or (3) to your heirs.
3. Be Financially Prepared
Determine the financial resources required for your pets' care and include this in your estate planning. Factor in veterinary care, grooming, food, and any other potential expenses. If you are considering a pet trust, you may also want to factor in administrative costs, such as the cost of preparing a tax return each year and paying the Trustee a fee.
4. Leave Detailed Instructions
Clearly outline your pets' daily routines, dietary needs, medical history, and any other specific requirements in your estate planning documents. The more detailed and comprehensive your instructions, the better the chances that your pets will continue to receive the care they are accustomed to.
5. Keep Things Updated
Life is dynamic, and circumstances may change. Regularly review and update your pet estate planning documents to reflect any changes in your pets' needs, your financial situation, the availability of designated caretakers, or even more pets (because there can never be too many!).
Conclusion
Comprehensive estate planning is a critical responsibility for every pet owner. This planning not only brings peace of mind to you as a pet owner, but also is a testament to your commitment to these cherished companions. If you have pets that you love, contact us today so that we can help you ensure a healthy and happy future for them.
This is a part of our February series: "Love, Relationships, and the Law." For more insights, click here.
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This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.
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