The Lange Money Hour: Where Smart Money Talks
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Who Will Care For Your Pets When You're Not There?
Jim Lange, CPA/Attorney
Guest: Robert Kass & Elizabeth Carrie
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- Introduction of Guests – Robert Kass and Elizabeth Carrie
- Why You Should Plan for Your Pet’s Future
- Have a Pet Owner’s Card
- Power of Attorney for Pets
- Pet Identification and Care Instructions Are Important
- Resource for Do-It-Yourself Trust for Pets
- Include Backup Care Instructions
- Examples of Poor Planning for Pets
- Ways to Memorialize Your Pet
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Welcome to The Lange Money Hour: Where Smart Money Talks with expert advice from Jim Lange, Pittsburgh-based CPA, attorney, and retirement and estate planning expert. Jim is also the author of Retire Secure! Pay Taxes Later. To find out more about his book, his practice, Lange Financial Group, and how to secure Jim as a speaker for your next event, visit his website at paytaxeslater.com. Now get ready to talk smart money.
Hana: Hello, and welcome to The Lange Money Hour, Where Smart Money Talks. I’m your host, Hana Haatainen Caye, and of course, I’m here with Jim Lange, CPA/Attorney and best-selling author of the first and second edition of “Retire Secure!” and “The Roth Revolution: Pay Taxes Once and Never Again.” Jim’s guests tonight are Robert Kass and Elizabeth Carrie. They are the authors of “Who Will Care When You’re Not There?,” a book about estate planning for pets. Bob’s practice concentrates on the areas of estate planning and planned giving for estates of all sizes from modest estates to the very largest. He is a fellow of the prestigious American College of Trust and Estates Council. Betty has extensive experience in estate planning, qualified personal residence trusts, family limited liability companies and private foundations. Tonight’s show will be all about trusts for pets. Estate planning attorneys are extremely focused on, and dedicated to planning for, the transfer of their client’s wealth and for the welfare of their families. However, relatively few estate-planning attorneys have delved into the details of various arrangements, which can be referred to as pet trusts, and attorneys are generally reluctant to advise their clients about this type of planning. On tonight’s show, you will learn all about how to take care of your pets after you pass. But before I turn it over to Jim, I want to remind our listeners that the show is live, so please feel free to call in with your questions for Bob and Betty. The number is (412) 333-9385. Good evening, Jim, and welcome to the show, Bob and Betty.
Jim: And welcome, Bob, also.
Bob: Thank you.
Jim: Before I start in, I just wanted to tell our listeners how this whole thing came about, because usually, I do, you know, heavy, substantive shows with guests like Ed Slott and Natalie Choate, Natalie being, probably, if not the top, certainly one of the top IRA writers in the country, and her book “Death and Planning for Lifetime Benefits” is just the classic book for IRAs, and I just revere her knowledge and her competence and she comes on every year. And in addition to owning her books and getting them every time she does new editions, she also has a newsletter, and in the newsletter, it said, “Wow, there’s this really cool book by this guy who really understands how to provide for pets.” And I was thinking, “You know, I never talk about that kind of stuff, either on the radio, and I don’t do it much in my practice. I should really have this guy on.” And anyway, so, that’s the story of why Bob and Betty are on. They wrote a terrific book, “Who Will Care When You’re Not There?” And the other thing that I really liked about Bob and Betty is it would be possible for, let’s say, just an okay estate planner who decided to do something a little bit off the beaten track and to write this book, but actually Bob and Betty both have serious credentials in their own right as estate planners, and to get a glowing testimonial from Natalie Choate, that’s about as good and substantive as you can get. So, anyway, with that introduction, welcome to the show, Bob and Betty.Bob: Thanks very much.
Jim: All right. So, you know, one of the things that you talk about in the book is providing for your pets, and you actually go into a lot of detail, but why don’t we just start with the basics? Why is it necessary, and what have you seen in practice in terms of providing for a pet? And I know that you have a lot of exotic stories, but maybe if we just start with something that maybe our listeners might more commonly have? So maybe a dog and a cat, or a couple of dogs or a couple of cats. What should those listeners be thinking about, and why is it necessary to provide for your pet’s future?
Bob: Well, the first thing that’s happened is that clients have come to us asking if we could help them make these plans. They consider the pets a part of the family, and they realize, in their cases, for example, that there won’t be anyone else to take care of the pets and they want to make some provision. So, we’ve had to think this through with them and look for examples of what has worked and the problems that have come up. And as we talked to more people, and particularly people who see the book, they share stories with us that are shocking to pet owners where someone has passed away and the family just takes all of the animals to the vet and asks for the vet to euthanize them, or another case where a fellow did want to make provisions, and did, in fact, write in a will which he drafted himself, that he leaves his pet cat Fritz to his nephew John and $5,000 to take care of the cat, and when he passed away, John came to the executor for the $5,000. The executor said, “Where’s the cat?” And he said, “I took care of it.”
Jim: Oh, no.
Bob: So, yeah, when you’re a pet owner and you hear that, you say, “This can’t be,” but these are stories that we hear from people, and you have to respond by saying “If you care enough about your pets, then you need to do something.” And it’s not only about when you die. It’s about, you know, the everyday occurrence if you get in a car accident and you end up in the ICU for three or four days. Does anyone know there’s a pet at home? It could be real basic.
Jim: Yeah, and actually, you know, that story where the guy got the money and he “took care of the pet” is…it’s kind of shocking. I’m sometimes a little bit naïve because, frankly, I believe, although I could be wrong, the vast majority of my clients would never do anything like that, but maybe I’m in a fantasy land and this is what really happens and you just can’t leave this to happenstance, and you can’t just trust your nephew John, or whoever it might be.
Betty: Well, and it might be, you know, even less nefarious. It can just be a huge burden for somebody to take on, particularly if you have a pet that has special needs. That was a little bit of a problem I got into, because my dog’s story is in the book. She’s a German shepherd with huge allergy problems and all kinds of other issues that happen as our pets age, and as we were writing the book, I kind of totaled up everything that I had spent on allergy testing, allergy shots, various visits to the emergency vet and, you know, over a ten-year period, I’d spent over $30,000.
Jim: And my thinking is, there are probably some listeners who’re thinking, “Man, she’s nuts!” But you’re a good, sound estate attorney with your own reputation well outside the pet field, and there are a lot of people who say, “Yeah, I get it.” You know, the pet was a part of the family, and if your kid’s sick, you take them to the doctor and whatever it is, you pay it, and unfortunately, in most situations, there isn’t insurance to provide for that.
Bob: Also, it happens a little bit over time, and it’s not like going in and the vet says “This is going to cost you $30,000.” It’s $200 here, it’s $500 there, and so over a number of years, the costs increase, and that’s why people need to think about if they are going to give this responsibility to someone, how are they going to pay for it?
Jim: All right. Well, let’s take the…if there is such a thing as an average listener, with his two-and-a-half children and 2.2 dogs, or whatever it might be, and let’s say that they’re in their fifties or sixties or even older, and they have a pet, and let’s assume that they are attached to the pet and they want to provide for the pet. What should most people be thinking about, if anything, for their pet?
Betty: Well, I mean, at a, what we kind of refer to as the bare minimum, everybody should have a pet owner’s card, something you carry with you in case something happens to you that lets people know that you have pets at home, and the signage that we put in our book, a copy to put on your door in case something happens.
Jim: All right. Could I interrupt you for one minute? Because that’s the first proactive thing that probably all pet owners should do that very few, including myself, have even heard of up until when I looked at your book. So, what you’re saying is that we should have maybe something in our wallets? Now, I know that you have a sample in your book, and I actually do hope that people will buy your book, and again, by the way, the name of the book is “Who Will Care When You’re Not There?” And as long as we’re on that, where can they get “Who Will Care When You’re Not There?” By the way, it’s by Bob Kass and Betty Carrie.
Bob: The book is sold on Amazon, and we do sell them direct to organizations that want to use them for fundraising, and a number of animal welfare organizations have done that. But the easiest thing for an individual who just wants a copy would be to go to Amazon.com, or if they want to find an easier way to find it on Amazon, they can go to the publisher’s website and then there’s a direct link. It’s www.carobtreepress.com, and there’ll be a button there. It’ll take you right to the Amazon page.
Jim: Yeah, and by the way, for the listeners, I actually tried it because I just wanted to be thorough. I would go to www.carobtreepress.com. And again, the name of the book is “Who Will Care When You’re Not There?” All right, so you have a sample card, but frankly, not everybody who has a pet is going to buy your book. Should they just take a piece of paper, or what should they do to say that they have a pet, and if they’re in the hospital or something like that, that somebody would see that something needs to be done?
Betty: Yeah, you could certainly do it just with a piece of paper that has the name of your pet, your address, emergency care numbers for people who you got already pre-arranged to come and take care of things if something were to happen to you.
Jim: Okay. So, let’s say, in my case, I have two cats. The truth is I’m really a dog person. I grew up with dogs and I love dogs, and if it weren’t for the issue of being responsible for the dog’s bladder, I would probably have a dog, but that wasn’t the lifestyle that I wanted. So, we have cats, and I’ve become attached to the cats. So, you would recommend that I have a little card that says something like “I have two cats at home, and if I am disabled or I am not able to respond, please call…” Well, I would start with the obvious, which would be my wife, but then, I would actually have maybe a neighbor or a friend who presumably would have a key to my house for immediate short-term need so the cats won’t starve, and in the case of a dog, can be let out.Betty: Right. That’s the bare minimum to start and it addresses emergency issues. The other issue, in terms of daily or planning for incapacity or emergency that we recommend is just as part of your estate planning that you have a durable power of attorney to give somebody legal authority to make decisions and to access funds, as well.
Jim: Okay. All right, so, the first thing is everybody should have a pet card that would have an emergency contact. I like that idea. And again, you have a nice form in the book. If people don’t buy the book, they can just make it and presumably put it some kind of plastic casing so it won’t get crumpled up and it’ll stay legible, and that would be, let’s call it, the absolute bare minimum. All right. Now, the next thing you’re talking about is the power of attorney. Do you recommend a separate power of attorney, in other words, a separate document just for pet care, or would you combine it with the traditional…I mean, I can’t remember ever…we’ve done about 1,700 wills in our office over the last, maybe, twenty-five years or something like that, and I don’t think that we have ever done a will without doing a power of attorney. We also do a healthcare proxy, or a healthcare power of attorney, in addition. And let’s just say, we don’t quite use a standard one, but let’s say that the one we use is pretty close to standard. Would that cover it, or do you really need a separate power of attorney?
Bob: If you didn’t have anything specific, I would rely on the general one. If you had an opportunity to do something, you could do a very short one which is specific to your animal, so that frankly, you may not want to give the same authority to the person who’s in charge of the animal as you would over your entire finances. You know, if it’s your next-door neighbor, you want them to have authority to take your dog to the vet and make some decisions. You wouldn’t want that person being the same one who has the ability to access your large bank account. And it can be short, you know?
Jim: Yeah, that’s actually a very good point because, typically, the powers of attorney, at least in my world, I usually don’t give it to bankers or attorneys. I give it to family members that we trust. You know, even on the issue of executors and trustees, I usually say name the family member that you like the least because it’s not really an honor. It’s more of a burden. But let’s say the kid’s in California, or not local, and would not be as good a choice as, let’s say, the neighbor. So, you’re saying either add that to the power of attorney that you are preparing for a client, or actually do a separate one that would say ‘In the event that I’m incapacitated, then I give my power to my neighbor Bill, my friend Joe, my son, or whoever it might be, but presumably, somebody who could get there on short notice.’
Bob: Right, especially if you’re drafting a document. I’d rather see that separately, and then you could just focus on what you need to do with regards to those people and who they are. My guess is it might be different people.
Jim: All right. Can I ask you, Bob, because I know…I don’t know how many wills you do, but I imagine you do a lot. You know, you’re pretty active and you’re always writing articles, and I read you in Steve Weinberg’s column more than a year ago, I think. So can I assume that you are actively drafting wills and trusts for people?
Jim: All right. And are you doing this as part of your standard that you are adding a power of attorney for a pet?
Bob: Well, we’re asking people now whether they want to do some planning for the pets, and if they do, then we’ll talk to them about powers of attorney and the whole system, which is really not just a legal document, but also care instructions. We really get into, you know, what they want to happen with the pet. It goes much farther than legal documents. But most people don’t want to do it, I’ll tell you frankly. A lot of them, I don’t know what percentage of the population even does estate planning. I’ve heard from some of my clients who go to Florida for the winter that they attend seminars for folks of substantial wealth, and when the speaker asks for a show of hands as to how many have estate plans, maybe half of them don’t. So a lot of people don’t even do planning. In fact, we heard that when we launched the book at the Detroit Kennel Club dog show. People said, “Heck, I haven’t even done planning for my kids. Why would I do it for my pet?” You know, so, we are asking the question now, and when we get the response, yes, I’d like to do something, then we’ll have a special power of attorney which would be an easier thing than folding it into the long-form one, and frankly, we’ve had issues with long-form ones that people, when it’s long-form, they want to refer to a legal department, and so on. Give them something simple. Kind of like if you were going to take someone else’s child on a trip for the weekend, and you wanted to know that if something happened, you could take them to the hospital. You know, it could be a couple of paragraphs.
Jim: Okay. By the way, this is terrific advice for me and I’ll be honest with you. I’ve been involved with maybe one or two trusts for pets, but I do not routinely ask, and one of the reasons that I like doing this show is it broadens my own horizons, and I get different ideas from different attorneys and different IRA experts, and hopefully give a few too. I was really pleased when I told Natalie Choate an idea and she said, “Wow! That’s a really cool idea! I’m going to start using that in my practice.” And I’m sure there’s other estate attorneys listening. Do you think that it would just be a good practice to ask people “Are you interested in planning for pets?” Because I’m going to be very honest with you: I have done exactly what the person who left the $5,000 and gave the pet to John, because I figured, well, you know, if you trust the person enough, you know, what kind of person is going to take the $5,000 and euthanize the animal? So, rather than messing around with a whole special trust for a pet, I just said “I’ll tell you what…” And by the way, that was the amount that I used to tell people, and I know that you have some opinions that that might not be anywhere near enough, but I used to say, “Well, why don’t you just give them $5,000, but just ask them if that would be okay?” And now, you’re saying hey, no, I really have to notch it up and really come alive with this. Is that right?
Bob: Yes, and I think the challenge is to do all that and make it affordable. And so part of the purpose of the book is to give the potential client enough background that they could do on their own so that they come into the attorney, hopefully someone who knows something about pet trusts, and they say, “I’ve looked at the issues, I’ve looked at the options, I understand the alternatives, I’ve thought through who I want to do what and approximately how much I need, and my discussion with you has to be on the open issues only that I haven’t figured out or I need more discussion, and then for you to draft something in the context of my overall planning.” So, if someone just went in and said, “I heard on the radio, I want to do something about pet planning” and they go to somebody who hasn’t done this before, it’s going to be a big project, and a lot of people won’t do it because it’s going to take a lot of time to educate them. But if they’d read the book or something similar, it doesn’t have to be this one although we tend to like this one, they’ve read the book, thought through the issues, filled out the checklist, and we’ve got a number of tear-out checklists in the back including care instructions. They take all that in, I think it’s a much simpler job, and especially if it’s part of their overall planning, it shouldn’t cost very much. So, we hope that way to have more of them done because, frankly, a lot of people will be discouraged. You know, their tension is ‘Am I going to outlive my pet to make all of this moot?’ And the fact is, we don’t know what’s going to happen, and then some pets are really special. They’re going to live a long time. We had a woman come up to us at the Detroit Kennel Club dog show and she told us a story of having picked up a parrot out in the woods when she was taking a walk. Someone had abandoned it and all of its feathers were gone, and she brought it home and put it on her shoulder and it said “Mama, I love you.” So there she was. She said, “I’m 55 and I have a parrot with a fifty-year life expectancy that isn’t a very friendly pet to other people, and I have to make plans.” So, everybody has a situation and sometimes, you know, it’s a minor situation and sometimes people with their pedigree animals, and sometimes, in our area, when they have one, they usually have another because they don’t want to leave them at home alone, so they have a pair, and they’re really a part of the family and quite expensive and need a lot of care, and we’ve got specialty vet clinics up here where there are 25 practitioners all the way from the neurosurgeons to the allergy specialists, and this is not cheap. So they want to figure it out, and they do.
Jim: So, leaving $5,000 to John is not really a thorough way to handle the problem?
Bob: I would prefer not.
Jim: Okay. So, let’s say, all right, the first minimum that we learned is that we should have some type of identification card for somebody, and then also, you’re recommending a power of attorney also.
Betty: Right, and a door sign, and you know, just something posted, I guess possibly like on your refrigerator or someplace where if somebody was coming into your home in the event of an emergency, that they could grab instructions as to your pet’s care. You know, my dog needed daily shots and all kinds of special care, and somebody wouldn’t know if it wasn’t written down. So, in a sense, the planning is in some ways similar to the planning you do with children. What would you want to know if you had to come in and take care of the pet? What type of information is needed? So, gathering all of that information in one place is going to make it easier on anybody having to step in.
Hana: Okay, Bob and Betty, this is excellent advice for those of us who love our pets, and we’re going to have to take a quick break, however. So, when we come back, we’ll continue this conversation about estate planning for your pets. I want to remind our listeners out there that we are live tonight, so if you have any questions, you can give us a call at (412) 333-9385. We’ll be right back with Bob Kass, Betty Carrie and Jim Lange on The Lange Money Hour.BREAK ONE
Hana: Welcome back to The Lange Money Hour. This is Hana Haatainen Caye, and I’m here with Jim Lange, who is speaking with Bob Kass and Betty Carrie about making special arrangements for pet care and estate planning.
Jim: Okay, and I just want to remind people, the name of the book by Bob Kass and Betty Carrie is “Who Will Care When You’re Not There?” which is a book about estate planning for pets, and that can be found, I think, easiest at www.carobtreepress.com. All right, so we talked a little bit about the ID. By the way, do you ever recommend putting a picture of the animal on the ID, because that would make it a little bit more obvious?
Bob: A picture would be fine, but I think what a lot of our clients are doing is using microchips. Imagine if I came into your home, I don’t know what kind of cats you have, but if they looked alike, how would I tell them apart? So, apparently, more and more people are doing that, and it isn’t a very expensive process. I understand that when an animal comes to a vet’s office, the first thing they do is check for the chip. So that would be the thing to do.
Jim: Oh, okay. I hadn’t thought of that. All right, so the next thing that you’re advocating is a power of attorney, which is a legal document. Why don’t we take it to the next step? And I guess, in a way, it’s more interesting to hear about the parrot, but I want to try to be a little bit practical and assume that the majority of our listeners who have an interest…let’s just stick with dogs and cats for the moment. What would you typically recommend if somebody was interested in doing this type of planning, in terms of the terms of the trust, how it would work and also how much money would be involved?
Bob: Well, the first thing is whether we get to the trust because it would really be almost an attachment to it, and what requires a lot of thought is the care instructions.
Bob: And even if they didn’t go so far as to do a trust, at least that they have the care instructions. It would be really helpful for someone to have that, assuming that someone has to come in who’s not already involved in the daily care of the animal. A lot of friends maybe know the animal and they’re friendly with the animal and they like the animal, but they really haven’t been involved in the feeding and the medication and the routine of the animal. So, assuming that you’ve got that covered, then we really get into the issues of what are the key decisions you need to address when you’re going to prepare a trust like this to provide for the future care of your pet in case something should happen to you.
Jim: Okay. Actually, could I take one step back?
Jim: All right. So, this might come as a terrible shock to you, but there’re actually people in Pittsburgh who are relatively frugal, and they prefer doing things the way that, let’s say, has some degree of being responsible, but it doesn’t cost them any money. So, the photo ID would be one, or without a photo, and the microchip, and then also care instructions that would presumably be given to the person who would be taking care of the animal. Is that right?
Jim: And then, maybe have it on your refrigerator or somewhere that would be obvious, and I guess, frankly, I know that we have little routines and we feed certain times and certain foods and then there’re treats, and I know people become a lot more elaborate than that.
Bob: Sure. And I think that if they, they could probably find something online. If they got the book, they would have a tear-out checklist that would kind of walk them through the questions that we think pet owners ought to be addressing in terms of care. And if they stopped there, it would be better than not doing it. I guess we’re talking about good, better, best, and so all of this, so far, is good, and better would be to come up with some kind of a funding arrangement where there’s some money that’s made available to take care of the animal if it has to be taken care of on a longer-term basis.
Jim: Okay, all right. Now, we can go to that, and I didn’t mean to cut that off, but I just know that there are a lot of people who do want to do something, but they don’t want to do something that costs them any money. So, I wanted to give that audience some good information. Now, let’s go to some people who would be willing to leave some money for the care of their pet, and I don’t think you’re talking about, like Leona Helmsley-type money, but what kind of trust, what kind of amounts do you have in mind?
Bob: I can’t tell you the amounts because it really depends on the animal.
Jim: Fair enough.
Bob: In terms of the trust, I think, although we only get to this at the end of the book when we talk about how do you really implement this, there is a world out there of online estate planning documents that we do not adhere to because we think a client always benefits from a consultation with the attorney to develop the plan. But if you tell me there are people who aren’t going to go to an attorney and want to get it done on their own, there are some, for under a hundred dollars, probably some pet trusts that will work. The question is, is that the best way to go? And if they say “All I’m going to spend is $79. I’m not going to go to an attorney. I want to do it myself.” It is possible to do that.
Jim: Well, this is an informational show. So, could you share those websites with our audience?
Betty: LegalZoom.com has one that’s basic, and one of things that you just want to be careful with when you’re doing that is to make sure that the planning is coordinated. And for example, you might, in your own individual estate planning, have concerns about leaving one particular family member in control of money, yet that might be the person you want to take care of your pet. So, if you use an online-type of form where you don’t have that thought process going on, you might say, “Well, I want to leave my animal to this person,” and they’ll just ask you how much money do you want to leave to provide for the care, you’ll leave a certain amount and now, all of a sudden, you’ve left money to somebody that in any other circumstance you would’ve said, “No, they’re not responsible. I don’t want to leave it to them.” So, just something to be aware of in connection with that, but at a minimum, those types of forms will work for somebody.
Jim: Yeah, you know, I have a little bit of a conflict with some of those types of forms because I do have some…you know, usually, most of my clients recognize that they want to have the judgment of an attorney and, particularly, somebody that understands taxes and IRAs and retirement plans, but I do tell people I’d rather they, if they don’t want to pay the freight for a real attorney, that doing something like that is better than nothing. Is it analogous that yes, these forms will get, you know, you can get by with them, but it’s really better to have to think out these issues with an attorney who does this type of work?
Bob: I believe that’s where we come down. If you’re not going to do it otherwise, we’d rather see you do it that way.
Bob: Because you will have an arrangement in place, and we can’t comment on which ones we might prefer, but we know the source of the legal document and it’s a real, credible source.
Jim: Okay. All right, so, that’s one way that people can do it. What would be some of the typical provisions that you would recommend? Maybe not on LegalZoom.com, but what are the kinds of provisions that you would like to see in that trust? And let’s assume, for discussion’s sake, that the total estate is a million dollars and there are some children involved, and let’s just say it’s a dog that has some problems, but not a huge amount of problems. And I know that this is a tough one, asking you to put a dollar number on it, but can you tell me about some of the provisions that you might have in that trust, and some rough amounts that might be appropriate?
Betty: Well, it partly depends on the age of the dog. It’s similar in that the cost curve tends to go up, not surprisingly, as they get older, than the problems occur. So, you know, what I did when planning for my dog was I ended up having to put her down last November, but she was 12 ½ years old. So, you know, out of that $30,000 that I had spent, most of it occurred within the last five years, so you kind of take a look at the budget, and then just kind of factor in…in a way, it’s just guessing a little bit at what additional amounts you anticipate because things are going to get more expensive as they go on, and your vet can help you and give you a rough estimate on what types of expenses you’re likely to incur going forward.
Jim: Well, just as an example, how much money did you provide, because I assume that you have this in your own documents? Because I hope you’re not going to be like the shoemaker’s shoes, right?
Betty: No, I ended up planning, because it got to the point where towards the end, when I took into account the regular medicine that she got and her food and just planning for the unexpected emergencies, so you can anticipate spending, if your dog’s in for pancreatitis or something like that at the emergency vet, that can be $1,500. So, that’s kind of the emergency, the little cushion, and then I estimated between, I would say, I budgeted, I want to say, like, around $5,000 a year going forward, and then I kind of estimated how long I thought she would have, based on her life expectancy. So, I basically allocated about $15,000 at the time I ended up doing the planning.
Jim: All right. And if there is money left over at the end, then that money, I guess, goes to your kids or you other heirs. Is that correct?
Betty: Right, or to go to an animal charity…
Jim: Or to an animal shelter.
Betty: Yeah, whatever you wanted to do that way.
Jim: Okay. Out of curiosity, did you have to pay inheritance tax on that? I guess you would, wouldn’t you?
Betty: You would. It would be a part of your gross estate.
Jim: Right.Betty: So, to the extent that you are subject to it, it would be part of your estate.
Jim: Okay. The other thing that you mentioned is you mentioned that you had to eventually put the dog down, and from the sound of it, you know, trying to sense the sensitivity that you have that you probably let the dog go for a while. Do you recommend any instructions for how long the dog should be kept alive if the dog is having problems and is in obvious pain?
Betty: Well, I mean, that’s one of the benefits actually of doing formal planning is that you can put your wishes and your approach to handling your pet into a document. And my approach with my dog was as long as I could keep her comfortable and she’s not going to be suffering, you know, I was willing to do what needed to be done, and it turned out that her last illness, it really didn’t linger. We just found out that she had a number of tumors, and there was nothing that could be done. So, at that point, you know, the decision was basically made, but part of the reason for doing that type of planning is to have that approach and my philosophy implemented, and that’s really something that’s personal for anybody doing the planning.
Jim: All right. Now, let me ask a practical question because, I’ll tell you what I’m doing right now is I’m trying to think about, let’s say, analogies to leaving some money to kids or something like that, and one of the problems that I have as an estate attorney, because estate attorneys love to draft trusts. We love to draft trusts anytime we can, and then we tell every business to incorporate. Well, I don’t, and the reason is is because we’re also CPAs, and sometimes we have to live with what the attorney created. So, if you have a trust, let’s say, where the beneficiary is a child or a grandchild, and there isn’t very much money in the trust, and the trust has to file a tax return every year and you’re paying at least a couple hundred dollars to the CPA to file the tax return, maybe there are a few do-it-yourselfers, but that’s a special Form 1041. I sometimes look for alternatives just to save the time and aggravation of filing the trust tax return. Is there an analogous problem with having a trust? I mean, I was even thinking less than $15,000, but even if we go with your number, that trust would still be a tax-paying entity. Is that correct?
Bob: Well, it’s going to depend on how much income it throws off whether the return is required.
Jim: Oh, that’s a good point. So, if you put it in something that, and I’m not even sure…
Bob: If you put it in anything today, you’re not going to make very much interest.
Jim: Yeah, so, you’re probably below the threshold that you’d even have to file. Is that right?
Jim: Oh, okay, good.
Bob: And I think as it gets larger, you know, we’re not talking about Leona Helmsley, but as it gets larger, that filing fee, if there is one, or the cost of the return isn’t going to be that material. I think what you’re trying to do is come up with a structure that addresses some of the issues that come up, which is care instructions have to be given, you’ve got to select the right person, we’ve found that you have to think about backup because as good as you think people are, we’ve seen cases where the situation changes, someone else comes into their life, they develop allergies, the animal becomes more of a burden than they thought. Very often, when you ask somebody to take the responsibility, they like you, they like the animal, they’re willing to do it, but when it really comes down to it, five years down the road, you know, it’s going to crimp their style and maybe they won’t do it. So, if you don’t have backup, now you’re back where you were before if someone says “I really don’t want this responsibility,” and you’re gone, and maybe you split the money and the care between two people, so you’ve got a money person who’s holding maybe $15,000 or $20,000, but the care person has backed out. We saw that happen where the care person thought they were going to get the money and the trustee said, “No, you’re not going to get the money until you need it to care for the animal,” and the person just gave up the animal to the trustee. So that, you know, having a trust with some provision for backup is really helpful.
Jim: You have some nasty clients! Not like my clients, who are all nice!
Bob: These actually weren’t our clients, but as we put the word out…you know, when you do a book like this, you’re trying to get input from real people, more than the cases you actually see. So, I’m involved with many professional advisory committees of attorneys and financial professionals, and I put the word out to these folks: have you had any stories? Have you had any experiences recently that we could talk about? And then, all of a sudden, stuff starts to come in, and this is where you learn that, you know, one person may have only one story in their experience, but you add them up, and someone says, you know, in the case that I just mentioned, the person knew they were dying, they went to a coworker they’d known for twenty years who had a dog, the person agreed to take care of their dog, they said “Let’s do a trial,” they did a one-week trial, but the person and their dog, the two dogs got along well, the person got along well, then the person in question passed away, the money went to the third party trustee, and the person picked up the dog and then said, “Well, I’m here for the money.” So, you know, how is that? You know someone for twenty years, they’re a coworker, a friend, you try it out, who could have anticipated? But there was no backup.
Hana: Okay, this is enlightening information, but we’re going to take another quick break. When we come back, we’ll continue this conversation about our provisions for our pets. I want to remind our listeners out there that we are live. However, there’s only a few more minutes to give us a call, so it’s (412) 333-9385, and we’ll be right back with Bob Kass and Betty Carrie.
Hana: Welcome back to The Lange Money Hour. This is Hana Haatainen Caye. And let’s get back to our conversation with Jim, who is speaking with Bob Kass and Betty Carrie about making special arrangements for pet care in estate planning.
Jim: And the book, which really…I mean, it’s not fair because I didn’t read all of them, but based on their reputation and the care and thought that they have given, I have to believe if it’s not the best, it’s certainly an excellent book, “Who Will Care When You’re Not There?” by Robert Kass and Elizabeth (although she goes by Betty) Carrie, and that can be found at www.carobtreepress.com. Bob and Betty, in case somebody has tuned in a little late, I want to ask if this is a fair summary of some of the things that we’ve talked about. One of the things that you’re going to be recommending for pet owners is that they have an ID card that says that they have a pet, and then there is an emergency care number. The other thing that you said is that that person who has the care, whether it’s a formal power of attorney (and we’ll get to that in a minute, or not) should have detailed instructions for the pet’s care. Then, if you wanted to take it a step further, that you would even consider a formal legal document with a power of attorney. A step even further than that would actually be a trust, and the alternatives that we talked about were for the do-it-yourselfers to go to www.LegalZoom.com, or to actually include that as part of your plan with the estate attorney, but expect that that’s not going to happen for free. Is that a fair summary?
Bob: Yeah, that’s a fair summary. It really deals with a couple of the major mistakes that we think people make in planning. One is not planning at all, assuming somehow that it’s all going to get taken care of, that someone will step in or you’re going to outlive your pet. So, if they do that, they’ve got the basics. They’re on their way to doing a proper plan, and how much effort and time and money they want to put in is strictly up to them.
Jim: Well, you have a number of interesting stories, probably more on when people have done it wrong than done it right. I guess when you do it right, it’s not nearly as interesting. And you’ve actually shared a few already, which sounded pretty bad, particularly for the poor dog. You know, we only have a few minutes left, but could you share maybe one or two stories that might motivate people to do something?
Bob: Sure. One of them, I think, really gets to the fact that you need to think through what you’re doing and not just go off on your own, and a lot of people have been shocked to hear the Leona Helmsley story, that she left $12,000,000 to a trust for her poodle, and it shocks them on the one hand to say how could she have left that much, but on the other hand, they’re saying why couldn’t she? Why can’t you do whatever you want with your money? And the fact is, you can’t, and the courts in every state have the ability to cut back the amount, which the judge thinks is excessive. Another example that we heard from a trust officer, who told us about a case where a woman who had a lot of cats left a multi-million dollar bequest and her house to the bank as a trustee with instructions that the bank use the money to take care of the animals in the residence for the rest of their lives. She never talked to the bank about it. She never let them know before she passed away that this was going to happen, and so when she died and they were brought into the picture, they said “We can’t do this. We cannot fulfill her plan as written. We just don’t have the ability as a bank to, you know, keep the house and take care of these cats in the house.” And they decided to have the local humane society put up the cats for adoption, and then the bank distributed the money to the humane society. That’s not what the woman intended, and it might have been a reasonable solution to the problem, but it wasn’t what she intended, and neither the bank nor the humane society could, you know, give any assurance as to the cat’s future welfare. So, the sizeable bequest isn’t being used to benefit her cats. It’s being used generally, and hopefully, the cats will be adopted out, but with a large bequest, particularly she should have consulted with somebody who said, “Okay, we understand what you want to do. How are we going to make it happen?”
Jim: And by the way, that goes probably in all areas of the law. If you’re talking about guardians for children, which is my big thing, you know, I tell even couples who don’t have a nickel to their name, you have to have wills for guardianship of your kids. You have to, in my opinion, talk to potential trustees to make sure that they are willing to do the job. You have to talk to potential executors, and frankly, a lot of the banks, particularly around here, not to name a few, they’re not so interested in small accounts, and it’s not prudent to draft naming any executor power of attorney, healthcare power of attorney, and now we’re actually talking about, let’s call it, health and pet guardians and pet trustees, it’s not smart to do this without talking to people ahead of time.
Bob: Especially on the pet guardian side. Another…I don’t know how much time we have, but another example, which we read about…
Jim: We have about four minutes.
Bob: Okay. Another example was where a large number of horses were left in the care of an organization, which was paying farmers around the country to take care of the horses, and somebody finally decided to send a vet out to check on them. They found that a number of them had died and a number of them were malnourished. So, there was money involved. People were getting a per diem for taking care of the horses, and you may think, well, horses are kind of exceptional. We’re dealing with mostly dogs and cats, but think about the fact that some people just may not be providing the proper care. Someone told me about a cat that had been brought in with the caregiver to the trustee for money, and the cat was, say, four years old. The next time the cat was brought in, it was only two years old. So, what had happened was somebody had substituted the animal! So, you got to have checks and balances. If there’s a vet involved with the family, have the vet be checking the pet. I don’t know if you go quarterly or annually, but, you know, you have to have someone checking in to make sure that things are done properly.
Jim: Boy, you’ve really heard some stories from some nasty people!
Bob: You open the doors and people will tell you, and each one only has one story.
Jim: I guess so. And by the way, I’m thinking right now of some friends, and they have quite a few goats, and I certainly wouldn’t know how to take care of a goat, and I don’t know if they have made any provisions or not. And actually, in their case, the goats actually produce cheese, or they make cheese from it. So, maybe the goats are paying for themselves, probably not! But that would certainly require care and special instructions.Bob: Part of what we talked about in the book also is the whole large animal dilemma. What do you do, you know, not just in terms of your death, but if there’s a natural catastrophe? What plans do you have that these animals get taken off the property, and where are you going to go with them and how are you going to get them there? So, if you’re talking large animals, you have a whole other set of problems, and to some extent, they’re different because they’re not necessarily family pets. I mean, goats are bought and sold, as are horses, but some people are attached to them. When they become family pets, that falls within the rubric of these kinds of trusts.
Jim: All right, and I think we have maybe time for one more quick question: there are people who, you know, I think it’s almost standard for a lot of families, and I just lost my mother, and I had many friends and relatives and even clients send in notes, and then also make contributions in my mother’s memory. What is a way to memorialize your pet or leave some type of legacy? And you have about one minute to answer that one.
Bob: Well, really, there are many ways to do it, and one thing that comes to mind as it concerns pets is to make a contribution to the local veterinary school, or perhaps the Humane Society or Leader Dogs, or someone like that, so that you can carry on the message and, you know, provide a general benefit for animal welfare. There are other things that people do, you know, in terms of planting a garden or doing things like that, but we think that, you know, part of our practice really is planned giving and charitable development, and anything that we can do to help people connect those motives with their favorite animal charity, I think would be really appreciated.
Jim: Well, anyway, this has been terrific. It’s Robert Kass and Elizabeth Carrie, authors of “Who Will Care When You’re Not There?,” a book about estate planning for pets, and the best place to get that is www.carobtreepress.com.
Hana: Okay, I want to thank you for joining us for another Lange Money Hour, Where Smart Money Talks. A special thank you to Bob and Betty. You can access our vast library of past shows on our website at www.retiresecure.com, and as always, you can catch a rebroadcast of this show at 9:05 am on Sunday morning, right here on KQV.END
James Lange, CPA/Attorney
Jim is a nationally-recognized tax, retirement and estate planning attorney with a thriving registered investment advisory practice in Pittsburgh, Pennsylvania. He is the President and Founder of The Roth IRA Institute™ and the bestselling author of Retire Secure! Pay Taxes Later (first and second editions) and The Roth Revolution: Pay Taxes Once and Never Again. He offers well-researched, time-tested recommendations focusing on the unique needs of individuals with appreciable assets in their IRAs and 401(k) plans. His plans include tax-savvy advice, will and trust preparation and intricate beneficiary designations for IRAs and other retirement plans. Jim's advice and recommendations have received national attention from syndicated columnist Jane Bryant Quinn, his recommendations frequently appear in The Wall Street Journal, and his articles have been published in Financial Planning, Kiplinger's Retirement Reports and The Tax Adviser (AICPA). Both of Jim’s books have been acclaimed by over 60 industry experts including Charles Schwab, Roger Ibbotson, Natalie Choate, Ed Slott, and Bob Keebler.
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