More than 60 per cent of Australian households have a pet. Dogs and cats are the most common. For some people, their most important asset is the house they reside in, yet for others it is their beloved pet. Indeed, many people actually prefer the company of pets to that of people.
It’s common knowledge that many people leave the distribution of assets to chance upon death, which might work out ok for the house, but what about the family dog or cat!
In many instances, a will is prepared with no thought to pets. This doesn’t occur on purpose, but they are often overlooked nonetheless.
So, my first question is: are there any animals in your household?
If yes, have you made arrangements for the care of your pets after you die?
No? Oh dear.
As your pet is treated like any other asset, ownership should pass to the beneficiaries of your estate. This may not be ideal if you don’t trust your beneficiaries to look after your pet.
Although, many pets are considered an integral part of families and the family members are often keen to ensure the pet is appropriately cared for should the worst happen.
You can’t leave all your assets for the pet
You may have heard of cases where people have left the family fortune to the cat. The cat wakes up one day and suddenly owns his own home, car and wads of cash.
That story is a myth.
Does Australian law actually allow an animal to become a beneficiary? The position in Australia is that for the most part, a beneficiary must be a person. Furthermore, Australian case law has generally ruled, that a gift must be charitable and drafted for the benefit of an actual person – rather than a gift for the maintenance of an animal. The reality is that there are a number of options available to animal owners, which can put their mind at rest when considering estate planning.
In other words, if you have plans to leave all of your assets to your dog or cat, this will not be possible. Best to destroy that will kit and learn how to prepare a valid will that will include your pets care.
Ignoring pets in your estate plan can leave them homeless or sent to a shelter. This spells a terrible end to a beloved friend and companion, especially for older pets that are unlikely to be adopted.
In developing a pet care plan there are some basic questions that need considering:
Who will be responsible for your pet?
Consider who would take care of your pet in the event that you die or become physically or mentally incapacitated. Perhaps it’s your children or other family members or maybe a close friend but either way before deciding to appoint someone to care for your pet you need to have a frank conversation to both gauge their interest but also to determine whether they will actually be able to care for your pet. It’s one thing for a friend to care for your pet while you go on holidays but it’s quite another thing to take on the responsibility and the costs for their remaining lifetime.
Your number one choice may have physical restrictions such as housing, allergies or mobility issues or they might just be unreliable. Regardless of whether you’re just asking a favor and promising some cash or setting up a formal legal entity, the critical element is finding the right person for the job.
If you are unable to find someone specific to care for your pet the next step may be to identify a local group – perhaps a charitable organization that can help. The initial consideration is to find out exactly what services they offer and what is required in return for finding your pet a good home. Is there some sort of agreement that needs to be signed in advance or do you need to leave a specific sum of money to pay for the cost of care? Organisations such as the RSPCA may be a good place to start.
How Much Money Should You Set Aside?
When leaving your pets in the care of an individual, you may want to gift a lump sum to help pay for the costs associated with your pet’s future care. To determine approximate costs you may want to calculate the annual costs to care for the pet, and multiple that figure by the pet’s remaining life expectancy, plus add some extra for medical care as the pet ages. Importantly if the recipient is receiving any Government assistance they may wish to confirm that this will not be adversely impacted by any gift otherwise alternative plans may be necessary such as the use of a trust. This can be a viable option if you are planning to bequest a significant amount of money or even leave a large amount to pay for expenses in excessive of the necessities of life.
What Paperwork Do You Need?
Once you have both a plan and a budget for your pet’s care, you have two ways to spell out your wishes in your estate plan: either within your will, or via a separate trust.
A will has the advantage of simplicity; including a pet in your will is usually relatively inexpensive. As with any other piece of property, you state in your will who you’ve chosen to inherit your pet upon your death — but you can also leave that person funds to help defray some of the cost of the pet’s care. Typically, the will would state that the person would only receive the money upon accepting responsibility for the pet. Your executor will be responsible for securing the agreement and passing along the funds.
Use this approach only if you truly trust your chosen caregiver. Generally speaking, a will won’t let you guarantee that the money will actually be used to care for the pet on an ongoing basis — or even that the designated guardian won’t give your pet away.
You can get more control, but with greater expense, with a pet trust, which lets you set aside money with specific rules as to how the money will be used. You’d name a trustee to manage the funds, and ensure that the money is used solely for the care of the pet.
I usually recommend that you name different people to be the trustee and the pet’s caretaker. The trustee will be responsible for providing money to the caretaker, ensuring that the pet is cared for, and — if necessary — finding a new caretaker if any problems arise.
The downside of trusts, however, is the cost: You could pay up to thousands of dollars in attorney fees to set one up — depending on where you live and the complexity of your situation — and the trustee is entitled to compensation from the trust funds. You’ll also want to decide what happens to any funds left in the trust when the pet dies; many people find it appropriate to donate the balance to an animal-related charity.
Ultimately, the decisions you make will depend on what works best for your family, your pet, and your financial situation. But you’ll get more peace of mind knowing that you’ve secured some sort of care for your pet
If you have any questions, don’t hesitate to contact Steve Wildes at Paris Financial on 03 8393 1000.