How to actually create a good trust plan: Part 1

Basics down. Let’s go into more details. . . .

Now I want to break down each part of the honorary trust process into smaller sections. Trusts for animals can be tricky. Over the course of the next few posts I’d like to cover, in detail, some of the important things to know and understand, including: 1) Trustees, 2) Trust documents 3) Funding your trust 4) Finding someone to help you with your trust.

Luckily, I am STILL working on perfecting my AT&T DSL connection so I have lots of time to write posts. The computer is still shut down for almost any other use for (hopefully only) a few more hours.

TRUSTEES

Anyone can serve as a trustee. There is no special training or licensing required. Who should serve as your trustee after you death is an important decision. A trustee needs to be responsible, organized, realistic, good with money and most of all, trustworthy.

Trustees take on certain duties outlined by law. These duties, fiduciary duties, mean the trustee can get into trouble with the law if they mismanage your trust. You will be dead, so its most likely you will not be suing the trustee, but that second cousin twice removed who is your only legal heir? She might try to get rid of the trust and the trustee so she can get her hands on your estate. It doesn’t matter that you have never met this person and would never have included her in your will. What matters is that anyone with even a remote legal interest in your estate can try and gum up all your well thought out plans. They do not have to worry about what you think of them. You are dead. They can just think about all the money they will win if they overturn your trust and run off your trustees. Your trustee must be up to having to fight for your trust if needed.

You need to be clear with your trustee that they are taking on a fiduciary role and will have to keep good books and account for very expense paid toward your animal. Some day they might have to explain their actions to a judge. States will vary in their reporting and accounting processes, but if the trustee mismanages your trust they can get in serious trouble. Make this clear and discuss the role of a trustee before you appoint someone. Get their informed agreement. They will not only be responsible for caring for your animals or overseeing the care of your pets, but they will also be responsible as your trust’s accountant.

Now I think you can already see the problem here. Your trustee should be a lawyer, an accountant, or a trust company. They know how to handle trusts and keep your funds safe and productive. However, they may not know jack about horses or cats or dogs. Personally, I can’t trust Bank of America with my checking deposits. I certainly wouldn’t trust them with the care and upkeep of my horse! When they lose my deposit they can make it up to me later. If they forget to pay the board bill on my horse and it gets sold under a stableman’s lien? They can’t make that up to anyone later.

Don’t fear though, there is a solution. You can have co-trustees, You can assign one trustee to mange your financial accounts and another trustee who knows a hoof pic from a socket wrench. That friend you were going to trust to take your animals under your will? He might be a great co-trustee to make the day-to-day decisions regarding the care of your animal. Then you just need to find a financial institution, degreed accountant, or other trained professional to manage the money. One has a head for money and one has a heart for animals.

Next, after you have struggled so hard and long with choosing a trustee you need to start all over again and chose successor trustees. Since you are clearly planning well ahead your first choice for trustee may precede you in death or have other circumstances that prevent her from carrying out her duties. Pick out a few back-ups or the Court will pick them for you. No trust shall ever fail for want of a trustee. The Court will appoint a trustee for your trust if yours declines or is not available. With these laws being so new and untested there is not a large pool of professional honorary trustees for The Court to choose from. Some day yes, but right now they might pick someone you do not want or someone who just happens to be standing in the back of the court that day. So make a string—if not A then B, if not B then C, if not C then D.

In my practice I do feel confident that my background in animal care along with my legal experience would make me an excellent trustee. However, I do not fool myself into thinking I am also an expert in finical investments and tax matters. Animal expert, legal expert, tax expert and investor are just too many hats to wear at once. If my clients have any appreciable wealth then I work along with their accountants to create a trust and manage it. Create a team that does what they do best and spread the responsibility out.

For example, I can write and very good honorary trust for the care of animals. That does not mean I am the best lawyer to writer a complete estate plan for someone who has millions of dollars and tax consequences to worry about. In a good plan I would do what I do best—write a section of your complete estate plan and a lawyer with an LLM in tax law and certification in estate planning would do the rest. Not all lawyers have 30 years experience as a professional in the pet care industry and an MS in Equine Science, but I don’t have 30 years experience in tax law either. There may be a few estate planners out there who can do it all, but I find its best to let specialists do each part under the guidance of one well qualified master planner. Keep experts in each field doing what they do best and don’t try and find a single trustee to do it all.

Lets review: anyone can be a trustee but it comes along with legal responsibilities and duties. Co-trustees who specialize in just part of managing your trust is advisable—animal expert to spend the money and financial expert to manage the money. Don’t try and have your family lawyer or accountant try and do more then they are trained to do. Let an expert deal with the honorary trust and let an expert deal with the remainder of your estate planning. The chances of finding one person to do it all well are slim. There is no rule that says you must have all your estate in one trust or all your animals looked after by a single person.

Some long awaited good news!

Finally. I am back. AT&T DSL has my entire computer shut down for a few more hours, but at least I can tap out a post and upload it later.

So, we know some stuff about honorary trusts. We know that they can be drawn up to leave money for the care and upkeep of your animals. We know a “trustee” will use that money to pay for your pets care. But most importantly, we know that a trustee has real, articulated legal duties and a court can enforce what you put in your trust. That’s the biggie—a COURT can do something if your wishes are not followed.

So lets talk about some of the details that survey web-sites do not cover. We know you can leave money for the care and upkeep of your animals, but how much money??? That depends on the state in which your trust is administered. Some states have years of experience with honorary trusts and have refined their codes to reflect the problems encountered over the years. Some states have just recently enacted the code and have bare minimum guidelines that will grow and change as the courts are faced with the results of litigation over Poopsie’s bequest.

Lets talk about the 2 extremes. The most extreme law actually outlines what reasonable costs for care should include and may limit those costs to the actual bills for feed, Veterinary care and other essentials. They do not allow the caretaker to be paid for the time and effort of caretaking. This is still an improvement over nothing, but it is more readily applied to small pets then to horses. Finding a home for a Yorkee might be easy, but finding board for a horse that does not include the costs of handling and extras is harder. Horse board includes the labor for caring for the horse. It can be hard to tease out which part of the bill is for the actual hay and feed and which part is for the labor.

In addition, I have never been fond of laws that require you to be loved and popular for them to work. Yes, most of us have family and friends who may take in our pet if something were to happen to us, especially if there are no extra bills to pay. But no, not all of us do. Some people must depend on professionals to care for their animals if something were to happen to them. Some of us will outlive our friends and family. Some of us would prefer to have our horse or dog taken care of by a professional, but professionals rightfully expect to get paid.

Next, what is the reasonable cost of upkeep? In the past few years costs have doubled and tripled. How can we plan for what it will cost to care for a horse a month or for a lifetime on 10 years? 20 years? I cannot even begin to imagine how to predict those costs in such a volatile economic climate. I think the key word is “reasonable” It may be very reasonable to play it safe and leave enough money for 10 times as much as it costs now and for twice as many years and we expect our animal to live. Unreasonable is probably leaving millions or billions of dollars like a recent hotel executive did. Anything over 1 billion is going to be seen as unreasonable.

The other extreme is a state where the code simply states you can use a honorary trust and they shall be enforceable by law. That’s it. No guidelines or case law to limit how you decide to use your money for your pets. A section of the code that states the law in place when the trust was created shall apply to the terms of the trust is great too. You should still limit your funding to a reasonable amount to avoid someone trying to overturn your trust, but no statements about how the money can be used or limiting paying for the care your animal receives is a better choice.

What? Did I say choice? That sounds off, doesn’t it> You can chose your laws? Yes, you can. You can chose your laws because you can chose any state to be the state your trust is administered in. You don’t have to live there, you don’t have to own property there, your animals do not have to be located there. At least one of your trustees must be there and the checks must come out of that state, but you can shop for the best state to have your trust administered in. Just like a corporation can chose a state that lets them pay very little taxes and gives then great protections (Delaware) trusts can be in any state you chose as long s that’s where they are administered. So a large NY bank can be the trustee of a large fortune and a small SC law firm can write your trust and administer it in SC for your pet. Cool, huh?

You, that horse owner in a state that does not have honorary trusts can still have one written and administered in a state that does. Nobody gets left out. You, that dog owner that lives in a state that will not allow your funds to be used for a boarding kennel can have a trust in a state that does. You must have a trustee in that state, but you can have multiple trustees. Your sister in CA can still be the one to decide what food your dog will eat but a trustee in some other state writes her the check to pay for the food. Administered means the under that states laws and somebody is doing the books in that state. It doesn’t mean you have to move there or ship your animals here on your death.

Do I hear a collective sigh from you readers???? Just find the best deal on trusts and then find a good trustee!

Which I will talk more about soon.

I wrote this whole post and did about 100 other tasks all while on the phone on hold with AT&T. I have spent most of the last 2 weeks on the phone on hold with AT&T.

Sorry about the lack of Posts!

I am trying to switch from dial-up to DSL. Little did I know it would be a 2 week journey through every conceivable screw up AT&T could come up with and harder to complete then an advanced eventing course.

Honorary Trusts and such. . . .

I have been locked out of google all day. I just got on and its too late for a really great post, but here are some links to get you started.

http://www.estateplanningforpets.com
http://www.animallaw.info/topics/spuswillstrusts.htm
http://www.animallaw.com/PetTrust.htm

Look around. Learn some stuff. Its not my intention to force you to pay me if you want a trust, but it is my intention to educate.

I'll be back soon with a post applying these new laws to our favorite dead gal--Cindy, but right how I just want to get this posted before google gets mad at me again!!

She's baaaaccckkkkkk. .Cindy Writes a WILL

Now lets try that same set of facts, but this time lets have Cindy leaving a Will. And yes, I know I am shamefully behind on posting but I have some real clients and who knew that took so much time? I do apologize to the 2 or 3 people out there actually reading this blog:> I will post it now and clean it up later if it needs editing. . . . .

Cindy Saver goes to a lawyer and has a Will drawn up that meets all her state’s requirements for form and formalities. She has an excellent Lawyer who leaves nothing out and nothing up to chance.

Cindy leaves her animals and her $60,000 bank account to pay for their upkeep to Sandy, her BFF. In addition, she tales out a $50,000 life insurance policy and leaves that to Sandy too to help care for the elderly horses. She states in her will that her dogs should be put down to “save them from falling into the hands of a Puppy mill breeder”

Cindy dies a few months later and all other property goes to her sisters and father as in the above example. Father grumbles about the money going for the horses; upkeep, but Cindy has wisely added a clause saying anyone that contests the will shall not inherit under it. Sally, however, does not want the poor puppies to be put to sleep.

Sally complains about this to her friend Lee who tells her to go to court and have a judge over-rule that part of the will. Sally doubts this is possible, but she is not willing to lose her share of the estate by trying to save the dogs. Lee, however, has no such limitations. Lee decides eh is going to try and help save the dogs.

Lee googles “put+animals+down+death+will” and in less time then it took to write that she is looking at an Animal Law website that cites cases in several states where judges overturned such provisions. Just 10 years ago this information might have remained buried in dusty law books where no person could find them, but today its right there and doesn’t even require a lawyer to find it.

Lee files her motion with the Probate judge and he hands the research over to his clerk. He has never had a question like this in his court, but he figures somebody somewhere has had to decide a similar case before. If not, he knows the common law rule that once you are dead you do not have much control over your personal property. You left it to someone else and they own it now. Public policy neither supports putting animals down needlessly or destroying valuable property for no reason.

The clerk, of course, does just what Lee did. She googles and checks Westlaw for cases like Cindy’s. The clerk finds the same cases, writes a memo to the judge and the judge rules for Lee. His rationale is that clearly Cindy worried that her dogs would end up with a Puppy Mill breeder, but since Lee has come forward and offered an excellent home Cindy’s fears are no longer justified. He awards the dogs to the custody of Lee, a total stranger to Cindy.

Lee keeps the dogs for a year but she works full time and just didn’t realize how much care 4 dogs required. At the end of the year she decides she can no longer care for them and a very nice man offers to adopt them all and give them a wonderful lifetime forever home. His name is Peter Puppymill.

Lee realizes a few months later that she has given the dogs to a bad home. Unfortunately, there is nothing she can do about it. There is nothing anyone can do about it. Only the dogs have an interest and dogs can’t petition a court. Cindy’s worst fear has come true and no amount of good lawyering can fix it. Sally makes an offer to Peter to buy the dogs at twice market price. He accepts. This is unlikely to really happen but I don’t want all you readers to get depressed.

Cindy’s horses and cash and life insurance policy go to her BFF Sandy. Sandy immediately loads up the horses in a trailer and sells them at auction for $650 each. She does not believe in keeping horses that nobody can ride and thinks the money is better spent saving younger useful horses she can ride and train and sell. She tells herself Cindy would have wanted it that way.

She forgets all about her promises to Cindy and buys a new truck while she is at it. Cindy’s father goes to Cindy’s lawyer and demands he stop the travesty. The lawyer says there is nothing he can do. The bequest could only rely on the good faith and good intentions of the person named in the will. If they turn out to be less then trustworthy, then no court can enforce the terms to protect the horses. He id the best he could, but Cindy had to pick someone she could trust even after she died. She picked wrong.

But Lee saved the dogs father yells at lawyer! Surely the judge will save the horses too? Sorry, says lawyer, that is not the case. Sandy has done nothing illegal or against public policy. She signed no contracts and Cindy trusted her. I wrote the very best will I could to protect Cindy’s animals. But until the write a law that is enforceable in a court I can only do what I can do. Cindy’s father leaves heavy hearted knowing that even though he always thought the horses; were a burden at least he would have respected her wishes.


Is everyone nice and worried and depressed yet???? Well, don’t worry anymore. There is a way to fix all these problems because somebody, somewhere actually did the work and made that law the lawyer lamented for a reality. I wasn’t me, but A big thank you to whomever went out there and lobbied more then half the states to incorporate Honorary Trusts for Animals into their probate codes!!!

Next post I will tell you all about these trust sand even how you can sue then if they are not yet in your State’s code. Is my e-mail address starting to make sense now?:> HonorLaw is not just because I try and act honorably, Its not just because I went to Washington and Lee Law School where Honor is drilled into our education. Its also because I want every pet owner in the US to know about honorary trusts for animals. They are new and your lawyer may not know about them yet.

Its now Today Instead of Tomorrow or Yesterday, so. ..

And now for more fun with dead people’s stuff. . . .

If you do not own animals and you die with no plan, no will and no trust, the worst that can happen is that your property loses value and somebody has to pay too much in taxes. Not the end of the world. It won’t bother you because you are dead. It may turn your family against one another or valuable property might be overlooked, but frankly, stuff loses its appeal once you are dead. Stuff is much more fun when you are alive to enjoy it and stuff doesn’t really care if its valued or not. Animals, on the other hand, do care what happens to them after you are gone.

Under the law, dying without an estate plan (will, trust etc) means your property will be divvied up according to state laws on intestacy. These laws vary by state, but the general scheme of things is that a group of relatives like your spouse, children, parents, or siblings and their heirs will get some pre-set portion of your stuff. The court will appoint an attorney or executor or administrator to decide who gets what, but the monetary values must be somewhat equal to the statutory requirements.

Your sister might be willing to forgo a tiny bit of your stocks in order to take home your prized Fiesta Ware collection and your wife may want your high school photo album in addition to the 6,000 shares stock, but none of this is up to you. Your lack of planning has made it a free for all for personal property and someone else will decide how to equally divide up anything of value. This person does not care what your wishes were. Even if they know you wanted all your worldly possessions to go to your brother, it does not matter. Its decided by the probate code of your state. You had a chance to control the estate and you didn’t bother.

This process will take about a year, sometimes more and sometimes less, but the probate court will be supervising your estate for a long time. Now think about your pets, your horses and your cats and dogs and birds. Can a horse be divided up equally among several parties? Do you trust your mother to care for your dog the way you want? Can you be sure anyone wants your animals or can afford to pay the incredible expense of keeping them happy and healthy? Breaking up the Fiesta Ware collection is sad, but having your horse dumped off at auction so the proceeds can be distributed is tragic.

I know, you think your loved ones would respect your animals as part of your family. They may even be true, but as costs for keeping animals rise at an incredible rate, it just may not be an option to expect your sister to pay board on your horse instead of buying health insurance for her kids. That’s not a gift, that’s a curse. And sadly, the Estates case books are full of the reality of greed. Animals are expensive and not always wanted by others.

Spot the Jack Russell may have been the apple of your eye, but nobody else may want the furniture eating, constantly yapping, ankle-biting pet you left behind. They can put him down as soon as your body is lowered into the ground. Its not like they have to look you in the eye after they do it. Or worse, you leave behind a horse. Your estate may be tied up in probate for a year while nobody knows who is to care for the horse or pay the board bills. You didn’t leave any money to pay for that. No matter how much you were loved in life, just one horse is too much to dump on your loved ones after your death. On average, right now, decent board for 1 horse is going to cost more then $5,000 a year. Who pays for that? Which interstate share is reduced for Dobbin’s expenses? How long before the courts can get the money flowing out of your estate and into the barn owners hands?


Lets try and example: Cindy Saver dies leaving no will and 4 dogs, 2 horses and a goat. She is survived by her father, an elderly gentleman of advanced years, and her 2 sisters, Sally and Betty. She owns a house in one state and an apartment in the mountains for summer retreats. She owns two houses full of nice furniture, some art work and a few semi-valuable antiques. In addition, she has $60,000 in savings.

The dogs are show dogs and are fairly young and healthy. They have a market value of about $2,000 each and there is a ready supply of buyers who would love to have them. The horses are old and somewhat creaky. One is lame and the other is sound, but has a history of bucking people off for his own amusement. They are worth only the auction price a meat man would pay and there is no ready market of takers for pasture ornaments because of a long standing drought and economic uncertainty. They cost $600 a month to support. Nobody knows anything about the goat; It just showed up one day and appears to be pretty useless for anything but making Cindy laugh.

Cindy was a resident in the State of Denial. That state’s intestacy statute says the parents get ½ of the estate and each sibling gets an equal share of the remainder. Nobody wants the horses and everybody wants the dogs. Father says he is too old and poor to care for two horses. He forgot that he now has the proceeds of ½ the estate to help defray the costs. Betty says she can’t have horses because she lives in the city. The horses have by this time racked up $4,500 in expenses. Cindy left a lot of money to her heirs in her estate, but nobody wants to use their share for the horses board and upkeep. Sally, always the closest to Cindy, says that Cindy would have wanted the estate funds to help pay for the care and upkeep of the animals she left behind. Unfortunately, Sally’s husband says if nobody else is going to kick in for the cost of keeping the horses its not fair for Sally to use all her share.The only fair solution is for the horses to be sold or given away.

Although Sally feels bad about her role, the family decides to advertise the horses on Creigslist to find them a good home. As luck would have it, there is an ad there already saying “All farm animals wanted. Will pick up and give good home. Will pay $50” None of Cindy’s family know anything about horses so they happily call Farmer X who offers to keep the horses forever and even includes the goat. The executor of Cindy’s estate is happy because a liability just turned into an easily dividable asset. Nobody pays the back board owed.

Sandy, Cindy’s best friend comes running in to say “No! Cindy said I should care for her horses if anything were ever to happen to her” but by this time the horses are already gone. Sandy even shows a written document by Cindy saying “I want Sandy to have my horses if I die” but the executor and the probate judge ignore it because it is not a will and did not follow the proper formalities. Everyone agrees its probably what Cindy wanted, but the Law gave Cindy clear instructions on how to write a will and how to plan for her estate and the judge cannot come in and fill in his opinions to replace the lack of a properly executed will.

Both horses and the goat end up at a low-end auction a few days later. Sandy wants to go to court and make Farmer X give the horses back, but she finds out it will cost her $20,000 in legal fees to try and undo the sale on the grounds he did not provide a good home as advertised. Cindy’s family wont foot the legal bills either, even though each person got $20,000 of Cindy’s cash. The horses end up in a place we will not discuss, but it was probably not where Cindy wanted them to go.

3 months after the probate is wrapped up Betty loses her job. Betty took all 4 dogs because she really loves them and she knows that’s what Cindy wanted. However, after a few months of living on the dole, Betty decides to sell all 4 dogs for the $8,000 Peter Puppymill has offered her. She let Sally have the artwork so she feels entitled to the dogs and all the proceeds the dogs can bring her. Father gets upset and sends Betty $8,000 so she wont have to sell the dogs. She sells them anyway and keeps the money.

Now Betty and Father are not speaking to each other, Sally is trying to patch things up but she is pretty mad at Father for not helping support the horses and at Betty for selling the dogs. The following Thanksgiving the remaining family members gather and all hell breaks lose. Each family member blames the other for doing what Cindy would not have wanted with her animals and somehow Betty and Sally end up arguing about who stole who’s My Pretty Pony when they were children and how the other never cared about Cindy anyway. Father gets so upset he has a massive heart attack.

Cindy, who is still dead and will remain that way, did manage to never have to think about her mortality and did save several hundred, perhaps even several thousand dollars in estate planning. Neither the dead horses, the dead goat , the tragic fate of the dogs or her families distress are her problem at all. She doesn’t care. She doesn’t have to see any of this take place. Sandy still cries about the horses she promised to care for. Sandy writes a will and gets a trust for her animals. At least something good came out of so much bad.

Now don’t get all depressed because over the next few posts you can learn all kinds of nice way to avoid all this!

Yes, I know. . . . .

My concept of "tomorrow" is not in line with the rest of the world.

I will post yesterday's post later tonight, which is what I call tomorrow, even if its 36 hours late.

The weather is fab outside and blogging in the fall might be a crime in the South. We only get 3 days of Fall and 3 days of Spring. There are fences to fix and ditches to dig and grass to mow and 1,000,000,000,000 other chores on a horse farm that need to be done.

Just don't plan in dying in the next week and all will be well with your will!

Howdy to the 2Ls in that Trusts and Estates class wishing you were done with Law School and living such amazing adventures as I am! Don't be in such a hurry, real life is much more boring and it does not come with as many free kegs:>