New Hampshire Bar Association
About the Bar
For Members
For the Public
Legal Links
Publications
Newsroom
Online Store
Vendor Directory
NH Bar Foundation
Judicial Branch
NHMCLE

Call NHLAP at any time. Your call will be personally answered, or your message promptly returned.

Trust your transactions to the only payment solution recommended by over 50 bar associations.
New Hampshire Bar Association
Lawyer Referral Service Law Related Education NHBA CLE NHBA Insurance Agency

Member Login
username and password

Bar Journal - Winter 2006

PET TRUSTS: The Uniform Trust Code Gives Enforceability a New Bite

By:

To be sure, attorneys may not be getting many inquiries from clients for such measures because our clients likely are not aware of the planning possibilities inherent in pet trusts.  Therefore, when first meeting with an estate planning client, it’s a good idea to ask whether the client has any special desire to provide for the care of his or her pets after the client’s death.  An attorney’s intake form or estate planning questionnaire can easily be revised to inquire as to the clients’ plans or concerns regarding their pets, which will encourage discussion of these issues with the attorney.


This article will discuss the development of the law in the area of trusts for pets, the new statutory provision permitting enforceable pet trusts in New Hampshire, the tax consequences of pet trusts, and finally, a number of practical considerations for attorneys drafting pet trusts. 

 

I.    Pet Trusts:  A Brief Historical Background

    
Prior to the enactment of the UTC in New Hampshire, there existed virtually no state-specific guidance in this area, there being no statutes and no reported cases involving pet trusts in New Hampshire.  It is unknown, if a pet trust had been challenged in New Hampshire, how the state’s Supreme Court would have ruled.

     
In other jurisdictions without pet trust statutes, pet trusts were sometimes permitted to be established as “honorary trusts,” which, although technically unenforceable, could be voluntarily carried out by the trustee.  This position was derived from the concept of “purpose trusts” set forth in the Restatement (Second) of Trusts, which stated:

Where the owner of property transfers it in trust for a specific non-charitable purpose, and there is no definite or definitely ascertainable beneficiary designated, no enforceable trust is created; but the transferee has power to apply the property to the designated purpose unless such application is authorized or directed to be made at a time beyond the period of the rule against perpetuities, or the purpose is capricious.2

Thus under the Restatement view, “purpose trusts” were really more like voluntary arrangements than trusts.  Drafters of pet trusts in “honorary trust” jurisdictions had to be mindful of the fact that such arrangements were unenforceable, because an animal lacked standing as a beneficiary to enforce the trust.3   Moreover, drafters also had to be mindful of the potential for violation of the rule against perpetuities.4

     
The rule against perpetuities was sometimes circumvented by means of judicial interpretation of the trust.  For example, in a 1950 Ohio case, a decedent’s will left $1,000 in trust for the benefit of the decedent’s dog Trixie.  The court held that the trust was unenforceable, but that the trustee could carry out the terms of the trust voluntarily.  As to the rule against perpetuities, the court held that as a practical matter, given the amount of money transferred to the trust and the directed expenditure (75 cents per day), the trust would last no more than four years and two months.  Therefore the trust was upheld by the court as an honorary trust, as it would terminate well within the maximum 21-year period set by the rule against perpetuities.
5  Yet another court permitted a pet trust as an honorary trust, but limited the duration of the trust to 21 years.6 

     
Yet the most risk-averse way of avoiding the rule against perpetuities problem was simply not to link the trust’s duration to the life of an animal.  A common technique was to grant a person living as of the date of the creation of the trust a vested remainder interest in the trust.  Alternatively, the trust would be set up to terminate as of a date certain, within the 21-year limit.  Obviously, the latter approach might not work with respect to a particularly long-lived breed of animal.

     
Regardless, the lack of enforceability of the trust, in jurisdictions permitting honorary trusts, meant that settlors hoping to establish such trusts had to accept a certain level of uncertainty. 

     
The Uniform Probate Code (hereinafter referred to as the “UPC”), which was not  adopted in New Hampshire,  contains a provision permitting the establishment of pet trusts.  This UPC provision, first proposed in 1990 and amended in 1993, represents the first broad-based statutory attempt at making pet trusts valid and enforceable.

Under the1993 UPC,

[A] trust for the care of a designated domestic or pet animal is valid.  The trust terminates when no living animal is covered by the trust.  A governing instrument must be liberally construed to bring the transfer within this subsection, to presume against the merely precatory or honorary nature of the disposition, and to carry out the general intent of the transferor.7

The UPC further clarifies that an individual can be designated or appointed for the purposes of enforcing “the intended use of the principal or income” of a trust.8  However, except as ordered by the court or as required by the trust itself, no filing, report, registration, periodic accounting, or the like is required of the trustee.9  Nonetheless, this is one of the earliest instances of a statute providing for the enforceability of a trust for the benefit of an animal.

 

II. Pet Trusts under the UTC


New Hampshire’s Uniform Trust Code expressly permits the creation of pet trusts, setting forth:

(a)    A trust may be created to provide for the care of an animal alive during the settlor’s lifetime.   The trust terminates upon the death of an animal or, if the trust was created to provide for the care of more than one animal alive during the settlor’s lifetime, upon the death of the last surviving animal.

(b)    A trust authorized by this section may be enforced by a person appointed in the terms of the trust or, if no person is so appointed, by a person appointed by the court.  A person having an interest in the welfare of an animal may request the court to appoint a person to enforce the trust or to remove a person appointed.

(c)   Property of a trust authorized by this section may be applied only to its intended use, except to the extent that the court determines that the value of the trust property exceeds the amount required for the intended use.  Except as otherwise provided in the terms of the trust, property not required for the intended use must be distributed to the settlor, if then living, otherwise to the settlor’s successors in interest.10

It is worth noting that subparagraph (a), unlike the UPC, limits the potential class of animal beneficiaries of such trusts to those animals “alive during the settlor’s lifetime.”11  Clearly, a UTC pet trust is intended to benefit companion animals.  It is not an appropriate planning vehicle for breeders or farmers wishing to provide for the continuation of their animals’ bloodlines after their death.  For those clients desiring that their animals continue to be bred following their death, particularly for income-generating purposes, it would be more appropriate to establish a business entity, such as a limited liability company, to own the animals and continue (with successor members and/or managers) following the deaths of the initial members and/or managers.12  Alternatively, the animals could be held in trust as part of the trust property, not as beneficiaries of the trust.  Either way, such animals should not benefit under a UTC pet trust.13

     
The UTC also grants authority to the court to amend or reform the terms of a pet trust in two circumstances.  First, the court may amend the trust to either appoint or remove someone as enforcer of the trust under subparagraph (a).  Any person “having an interest in the well being of an animal,” not necessarily the animal’s caretaker, may petition the court to do so.  This provision may give peace of mind to the settlor who is concerned about the ability or willingness of a trustee or trust enforcer to perform their duties under the trust.  Most importantly, it also calls for a level of enforceability heretofore nonexistent in New Hampshire.

     
It should be noted however, that a person appointed to enforce a trust for the care of an animal has the rights of a “qualified beneficiary” for purposes of the UTC.
14  This term is important because it places the trust enforcer in a position to receive important information regarding the trust.  Qualified beneficiaries must be kept “reasonably informed about the administration of the trust and of the material facts necessary for them to protect their interests,” after the trust has become irrevocable.  As such they have the right to receive the trustee’s name, address and telephone number; notification of the right to receive a copy of the trust and the trustee’s report, and, upon request, a copy of the trust document and an annual trustee’s report.15

     
Furthermore, the court may, if it determines that the value of the trust property exceeds the amount required for the intended use of the property (i.e., the amount needed to care for the pets for the remainder of their expected lifespans), return the excess property to the settlor or its successors in interest.  Perhaps this provision permitting the court to limit the assets comprising the trust corpus of a pet trust is responsive to anecdotal accounts of eccentric rich persons who have left vast fortunes to their quadrupedal loved ones.  In reality, most pet trusts will be somewhat more limited. 

     
In New Hampshire, the rule against perpetuities is no longer of great concern, as a trust is permitted to waive out of its application.
16  Nonetheless, the UTC overrides the rule against perpetuities by expressly permitting the duration of the trust to be measured by an animal’s lifespan.

     
Although the UTC pet trust approach presents a ripe planning opportunity for pet-loving clients, this rule is still the minority approach in the United States.  As of 2005, UTC Section 408 has reportedly been adopted by 14 states, including New Hampshire.
17  Some, but by no means all, other states have either adopted the UPC or enacted other pet trust statutes.  Clearly, there is inconsistency in the recognition and interpretation of pet trusts across the United States.

 

III. Income Tax Treatment of Pet Trusts 

     
In 1976, the IRS addressed the federal income tax consequences of a trust established for the care of an animal.
18  Revenue Ruling 76-486 considered whether the establishment of a trust for the benefit of a pet animal created a valid trust for purposes of imposing taxes under Section 641 of the Internal Revenue Code of 1986 (hereinafter referred to as the “Code”).19  Under Code Section 641, the taxable income of a trust is computed in the same manner as that of an individual, except as otherwise provided.20  A trust may deduct income to beneficiaries from its taxable income, however.21  Any such income paid, credited, or required to be distributed to beneficiaries is typically included in the taxable income of the beneficiaries rather than that of the trust itself. 22 

     
In Revenue Ruling 76-486, the will of the decedent, “A,” had established a testamentary trust to care for A’s pet animal.  Upon the death of A’s pet, the trust corpus was to be distributed to A’s heirs, if living, or their descendants.  At the time, this trust was void in A’s state due to the fact that it violated the rule against perpetuities, as the life of an animal was not considered a proper measuring life.  Because the trust bequest for the care of A’s pet was void from inception, the IRS stated that a valid trust never came into being for purposes of the imposition of tax under Section 641 of the Code.

     
More interestingly, the IRS also stated what its holding would have been if A’s state had permitted trusts to be established for the benefit of animals.  When Revenue Ruling 76-486 was released, some states were permitting settlors to establish unenforceable honorary trusts for the benefit of pets.  The IRS stated that although such trusts generally are permitted to deduct distributions to beneficiaries from their income to arrive at taxable income, animals were not “beneficiaries” for this purpose.
23  Therefore, although pet trusts may, pursuant to state law, be considered valid trusts for the purposes of taxation under Section 641, distributions made on behalf of pets are not deductible.

     
Under this holding, a distribution from a pet trust for the benefit of a pet, not being deductible from the trust’s income, must therefore be taxed at the trust’s own tax rate.  This result is understandable; after all, animals do not have Social Security numbers and they do not file tax returns!
24 

     
Yet the potentially negative consequences of this ruling are clear.  The income tax rate on trusts (the same as for estates) is a progressive tax rate, with much steeper progression into higher rates than the income tax rate for individuals.  For example, for 2004, a trust need only have taxable income in excess of $9,500 to become subject to the highest tax rate of 35 percent.
25 Those filing as a single individual, married filing jointly, or as head of household, however, must have taxable income in excess of $319,100 to become subject to the 35 percent tax bracket for 2004.26

     
Therefore, attention must be paid to the potential pitfall of confiscatory tax rates with respect to trust income distributed for the benefit of pet animals, which is deemed “retained” income by the IRS.  As a practical matter, a relatively small trust fund can be held in a bank checking or savings account which receives minimal or no interest, thereby eliminating income tax concerns.  Yet a trust for the care and keeping of numerous pets, to continue to reside in the family residence with a caretaker after the settlor’s death, might need to be funded with a substantial amount.
27  One way to try to minimize the impact of income taxes on the trust’s assets would be to invest trust assets in municipal bonds or other tax-free investments, or to invest for growth rather than income. 

     
A more aggressive reading of the tax law would permit amounts distributed from the trust to pay a caregiver’s salary to be deducted as a necessary trust administration expense.  It is unclear whether the IRS would support this position.

 

IV.  Estate Tax and Pet Trusts:  the Failed “Charitable Remainder Pet Trust”                                                                                  

     
As the establishment of a trust for the benefit of one’s own pets does not constitute a charitable purpose, typically there would be no charitable deduction permitted from an estate for an amount left in trust for the pets.  However, many trust settlors, particularly those without children, wish to leave the remainder of their pet trusts to an animal-related charitable organization.  Following the release of Revenue Ruling 76-486, a creative tax practitioner asked the IRS to rule as to whether a decedent’s will could establish a charitable remainder trust for the benefit of a pet animal.  Specifically, the decedent would devise a portion of his or her estate to a trust that would make payments for the care of the decedent’s pet.  Upon the death of the pet, the trust would terminate and the remainder would be transferred to a charitable institution.  The trust would qualify as a charitable remainder annuity trust in every respect except that the beneficiary was the decedent’s pet animal.
28 If the IRS had deemed this kind of trust to be a valid charitable remainder trust, the trust would have generated an estate tax deduction for the estate of the decedent.29

     
In response to this query, the IRS stated that, because a pet animal was not a “person” for purposes of the Internal Revenue Code, such a trust could not meet the regulatory requirement that distributions from charitable remainder trusts must be payable to or for the use of a “named person or persons.”
30  Therefore, assuming that a trust for the benefit of a pet was valid under state law, it still did not meet the requirements for a charitable remainder trust under the Code and Regulations, and therefore the remainder interest transferred to the charity was not deductible from the decedent’s estate.  Ironically, the IRS concluded that had a trust for the benefit of animal been void under state law, thereby causing the remainder interest contribution to the charitable institution to be accelerated (by reason of failure of the trust), the entire contribution would be deductible from the estate as a present interest passing to the charitable beneficiary.

     
In 2001, Rep. Earl Blumenauer, D-Oregon, introduced a bill to amend the Code to permit charitable remainder pet trusts.
31  This legislation would permit a charitable deduction for amounts transferred to charitable remainder trusts established for the lifetime benefit of pet animals, with the remainder interest transferred to a charitable institution.  Consistent with Revenue Ruling 76-486, distributions from charitable remainder pet trusts to pet beneficiaries would still be considered taxable income to the trust, not the beneficiary. 32 This bill failed to make it out of the Committee on Ways and Means, and reportedly there are no plans to reintroduce it at present.33

 

V.       Practical Pointers for Pet Trust Practitioners

     
In light of both the UTC, as adopted in New Hampshire, and the Internal Revenue Code, there are numerous practical matters for attorneys to consider when drafting UTC pet trusts.  In New Hampshire, most pet trusts will be drafted as inter vivos trusts, so as to avoid continuing probate court oversight that will occur with a testamentary trust.  The following list, although surely not exhaustive, presents some drafting issues to be considered that are most likely unique to the context of pet trusts.

     
Nominate the trust enforcer.  Of utmost importance in a carefully drafted pet trust is the nomination of the trust enforcer.  This enforcer will stand in the shoes of a “qualified beneficiary” for purposes of reporting and disclosure required under the UTC.  Attorneys who usually draft trusts waiving all reporting and disclosure obligations (other than those required under the UTC) may want reconsider that position in the context of pet trusts.  It’s in the client’s interest to make sure that the trust enforcer has full and complete information when looking out for the pet’s best interests.  The trust enforcer may also be given the authority to remove or replace the trustee or the pet’s caregiver.  In many cases, the drafting attorney is nominated as trust enforcer.
34 

     
Consider nomination of a pet care panel.  A “pet care panel” is basically an advisory board for the trust consisting of friends, relatives, the pets’ veterinarian, and any others with an interest in the pets’ well-being.  The pet care panel can make decisions and recommendations relating to the standard of care for the animal/s, health care decisions (such as the decision whether to euthanize), the choice of caregivers, the caregiver’s salary and bonus, and other matters relating to the well-being of the beneficiary pets.
35  Having a pet care panel can make the pet trust a living, flexible instrument and can relieve the trustee (which can be a financial institution) of the burden of making decisions for which it is not equipped. Like the trust enforcer, the pet care panel can be given the authority to remove or replace a trustee or caregiver.  The pet care panel can also advise the trustee in the event of an unexpected event, such as the animal’s running away.

     
Consider nomination of a caregiver.  With a well drafted pet trust, the caregiver need not be nominated in advance.  The trustee, trust enforcer, and/or, if applicable, pet care panel may be given authority to appoint the caregiver when the need arises.  Of more importance, as noted above, is that someone have the authority to remove or replace the caregiver.  Obviously, the caregiver should not be someone who is also a remainder beneficiary under the trust, due to the inherent conflict of interest involved.

     
Consider payment to the caregiver.  Payment to the caregiver in reimbursement of expenses can occur in one of two different manners.  One method would be to distribute a fixed periodic amount (for example, $500 monthly) to the caregiver regardless of actual expenses.  Using this method could result in the caregiver getting a windfall during a month when the pet incurred very little in actual expenses, or a shortfall during a month when the pet incurred extraordinary expenses.  The second manner of making distributions would only reimburse the caregiver for actual expenses incurred for the benefit of the pet.  The latter method, of course, requires more paperwork and documentation from the caregiver.  The client should also decide whether to pay the caregiver a salary.  Some pet trusts are drawn up with bonuses to be paid to the caregivers for the longevity of the pets in their care.
36

     
Consider the likelihood of an out-of-state move.  Inadvertent estate planning consequences can result when a client executes estate planning documents, moves, and fails to update those documents.  This is particularly true with respect to a settlor who has executed a pet trust document, given the lack of uniformity in state law.  Clients should be advised that these trusts may be considered as honorary trusts or even held invalid should the trust not be recognized by an out-of-state court.  Still, it is prudent to include a choice of law provision in the trust document stating that New Hampshire law, specifically R.S.A. Section 564-B:4-408, is to apply to the interpretation of this trust.  It might also be helpful to include a contingency provision describing what should happen in the event that the trust is deemed invalid.

     
Estimate the amount needed for the care of the pet or pets. It is important to accurately calculate the amount needed to fund the trust to properly care for the settlor’s pets, as the UTC restricts the funding of the trust to only that amount required for its intended use.  The amount needed to care for the pets can be quite large, as in the case of a family with seven or eight pets who wish them to reside in the family home for the duration of their lives with a hired caregiver.  In that case, the trust must pay for the maintenance and taxes on the real property, upkeep of the animals, and a caretaker’s salary.  In the case of one elderly cat to be placed in the caregiver’s own home, however, the amount needed to fund the trust might be minimal.  For a larger trust, an investment plan can be drawn up, taking into account the expected lifespan of the pet and the tax consequences discussed herein.

     
Consider the standard of care.  Critical in estimating the amount required to fund the trust is setting forth the standard of care that the settlor expects the trust to provide for the pets.  Regardless whether the trust calls for a Pet Care Panel to make such decisions, the settlor/pet owner may be most comfortable setting forth his wishes as to the pet’s standard of care in writing.  It is a good idea to have the client help prepare a “Pet Profile,” a document which outlines the pet’s care needs, medical history, and even personality quirks.
37  Moreover, written guidance in the standard of care can give the court guidance in the event that somebody brings suit to challenge the amount set aside in trust for the care of the pets.  Obviously, food, housing, grooming, and medical care are all appropriate care for pets.  Purchasing an automobile to transport the pet is probably excessive.38 

     
Consider liability insurance for the trust.  The decision should be made, based upon the personality and type of pets benefiting from the trust, whether the trust should be insured with respect to any damage, whether property damage or personal injury, attributable to the settlors’ pets.

     
Identify the pet animals clearly.  Under the UTC, the trust can last no longer than the lifespan of the animals alive during the settlor’s lifetime.  To protect the animal’s interest, clear identification of the specific animal or animals benefited by the trust should be made; a microchip implanted in the animal is a very secure means of identification.  In one reported situation, a dishonest caretaker apparently substituted new animals for a deceased one, in an effort to continue to receive benefits.
39

     
Consider the remainder beneficiary.  Consider that it may be a conflict of interest for the animal’s caretaker to be the remainder beneficiary of the trust.  Also consider the possibility of a remainder beneficiary or heir of the settlor challenging the amount funding the trust as excessive.  If that is a possibility, a “no contest” clause in the trust, limiting the amount that may be received by a beneficiary who challenges the trust, may serve at least as a disincentive to challenge the trust.  As an alternative, a pet trust established with a charitable organization as remainder beneficiary may be less likely to be challenged.  However, under the UTC, as any funds successfully challenged as “excessive” are returned to the settlor or the settlor’s “successors in interest,” heirs omitted from the estate plan may have an incentive to challenge the trust regardless of the remainder beneficiary named in the trust.

 

VI.      Conclusion

     
In conclusion, pet trusts, carefully drafted, can be a useful estate planning tool for animal-loving pet owners, and present an excellent opportunity to add creativity and value to a client’s estate plan.  However, enough pitfalls exist in this area that special attention should be made to issues unique to the pet trust context.  It is hoped that this article provides at least a starting point from which to consider various issues applicable to pet trusts in New Hampshire.  While this may just be the beginning of the conversation on pet trusts in New Hampshire, given the growing importance of pets to their owners, it is probably not the last word.

 

Endnotes

1.     Attorney, Falkner, Freund, Worthen & Caffrey, P.C., Keene, New Hampshire. The author would like to thank New Hampshire Attorneys Susan Hassan, John Norton, and Janelle Laylagian (Staff Attorney for the New Hampshire Probate Court) for their assistance in preparing this article.  Special thanks are also extended to Attorneys Paul Dillon of Corinth, Maine, Eden Rose Brown of Salem, Oregon, and Peggy Hoyt of Oviedo, Florida (Author of the book, All My Children Wear Fur Coats—How to Leave a Legacy to Your Pet [Legacy Planning Partners, 2003]), who generously shared their expertise with the author.  However, any errors in this article are solely the author’s responsibility.

2.     Restatement (Second) of Trusts Sec. 124 (1957).

3.     For a complete discussion of pet trusts as honorary trusts and other judicial interpretations, see Beyer, Pet Animals:  What Happens When Their Humans Die?, 40 Santa Clara L. Rev. 617 (2000), available at www.animallaw.info /articles/arus40sanclr617.htm.

4.     For purposes of the rule against perpetuities, the only measuring life that can be used is that of a human.

5.     In re Searight’s Estate, 95 N.E.2d 779 (Ohio Ct. App. 1950).

6.     In re Lyon’s Estate, 67 Pa. D. & C.2d 474 (C. P. Orphan’s Ct. 1974).

7.     Unif. Probate Code Sec. 2-907(b) (amended 1993)

8.     Unif. Probate Code Sec. 2-907(c) (amended 1993)

9.     Id.

10.    R.S.A. Sec. 564-B:4-408

11.    The comments to UTC Sec. 408 state, however, that “animals in gestation but not yet born at the time of the trust’s creation may also be covered by its terms.”

12.    By comparison, under the 1990 UPC, a trust could be established for the care of an animal and the animal’s offspring.  The 1993 amendment to the UPC, however, omitted this reference to the animal’s offspring.  See Comments and Amendments to the UPC, 1997 Main Volume.

13.    In the case of an ongoing business related to the breeding of animals, the entire business, including items used in the breeding business such as equipment, kennels, stables, or even real property, would be transferred to a trust, limited liability company, or other entity.  This model is frequently used in farm transfer estate planning.  The trustee, or a caregiver hired by the trustee, takes care of the animals upon the owner’s disability or death so as to prevent the deterioration of the assets in the trust (breeding animals often must be bred on scheduled cycles).  Telephone conversation with Attorney Paul Dillon, Corinth, Maine, November 10, 2005.

14.    R.S.A. Sec. 564-B:1-110

15.    R.S.A. Sec. 564-B:8-813, as amended by H.B. 542 (2005).

16.    R.S.A. Sec. 564:24, effective January 1, 2004.

17.    NABR Animal Law Section, www.nabr.org/AnimalLaw/Trusts/index.htm.

18.    Rev. Rul. 76-486, 1976-2 C.B.192.

19.    Although Revenue Ruling 76-486 considered this fact pattern under the Internal Revenue Code of 1954, the precursor to today’s Internal Revenue Code of 1986, the provisions of the 1986 Code, as amended, do not appear to have changed the substantive result of Revenue Ruling 76-486.

20.    26 U.S.C. Sec. 641.

21.    26 U.S.C. Sec. 651 (trusts required to distribute current income) and Sec. 661 (trusts accumulating income or distributing corpus).

22.    26 U.S.C. Sec. 652 and Sec. 662.

23.    The IRS based this argument on its reading of 26 U.S.C.  Sec. 643, which states that “the term ‘beneficiary’ includes heir, legatee, devisee.”  The IRS thus concluded that heirs, legatees, and devisees are persons, citing 96 C.J.S. Wills, section 1097 (1957).

24.    Although some authorities are now recommending that pets have their owners’ Social Security numbers tattooed on their thighs, see USDA Animal and Plant Health Inspection Service Factsheet, “Safeguarding Pets,” September, 1997, available from APHIS, USDA, 4700 River Road, Unit 84, Riverdale, MD 20737, this author has not discovered any proposal that animals should have their own tax identification numbers.

25.    2004 Instructions for Form 1041 and Schedules A, B, D, G, I, J and K-1, page 22 (Internal Revenue Service).

26.    2004 1040 Instructions, page 72 (Internal Revenue Service).

27.    One couple funded a trust with $850,000 in order to allow their horses, goats, llamas, cats, dogs, and pot-bellied pig to remain at their family home with a caregiver, who was to be paid a salary and bonuses from the trust.  Owners Setting Up Their Furred and Feathered Friends for Life, Investment News, Vol. 9, No. 30, August 15, 2005. 

28.    Rev. Rul. 78-105, 1978-1 C.B. 295.  Again, this ruling was issued under the Internal Revenue Code of 1954, but the 1986 Code, as amended, does not appear to have changed the substantive result of Rev. Rul. 78-105.

29.    26 U.S.C. Sec. 664 (describing charitable remainder trusts); 26 U.S.C. 2055(e)(2); 26 U.S.C. Sec. 2055(a) (allowing charitable contributions to be deducted from estate).

30.    Citing Sections 1.664-2(a)(3) and 1.664-3(a)(3) of the Treasury Regulations, and 26 U.S.C. Sec. 7701(a)(1).

31.    H.R. 1796, 107th Cong. (session 2001), also known as  “The Morgan Bill,” after the drafting attorney’s pet Collie. 

32.    Proposed new subparagraph Section 664(b)(5) of H.R. 1796 stated that “Notwithstanding any other provision, including subsection (c) of this section, if the beneficiary of a trust described in this subsection is an animal as provided in Section 664(d)(5), all distributions of income for the support of the animal shall be considered taxable income of the trust and shall be subject to tax as provided in Section 1(e).”

33.    Owners Setting Up Their Furred and Feathered Friends for Life, supra note 27.

34.    Telephone conversations with Attornies Eden Rose Brown (November 14, 2005) and Peggy Hoyt (November 17, 2005).

35.    Id.

36.    Telephone conversation with Peggy Hoyt, November 17, 2005.

37.    Telephone conversations with Attornies Brown and Hoyt, supra note 34.

38.    See In re Rogers, 410 P.2d 710, 710-711 (Ariz. 1966).  As a cautionary note, the attorney, who had designated himself as caretaker and was the party purchasing the automobile to transport the pet, was suspended from the practice of law for 60 days.
39.      “Inconsistencies in the reported age of the pet tipped off authorities to the fact that the maid [caretaker] was on her third black cat, the original long since having died.”  Beyer, supra note 3, citing Torri Still, This Attorney is for the Birds, Recorder (San Francisco), Mar 22, 1999, at 4.

 

Author

Susan AbertAttorney Susan Abert is an associate at Faulkner, Freund, Worthen & Caffrey, P.C., in Keene, New Hampshire.

 

 

Inclement Weather Notice

Home | About the Bar | For Members | For the Public | Legal Links | Publications | Online Store
Lawyer Referral Service | Law-Related Education | NHBA•CLE | NHBA Insurance Agency | NHMCLE
Search | Calendar

New Hampshire Bar Association
2 Pillsbury Street, Suite 300, Concord NH 03301
phone: (603) 224-6942 fax: (603) 224-2910
email: NHBAinfo@nhbar.org
© NH Bar Association Disclaimer