Some advisors are prompting clients to make plans for their pets, ensuring they discuss how much money to leave and who will care for them.ChristopherBernard/iStockPhoto / Getty Images
Sign up for the Globe Advisor weekly newsletter for professional financial advisors on our sign-up page. Get exclusive investment industry news and insights, the week’s top headlines, and what you and your clients need to know. For more from Globe Advisor, visit our homepage.
Shelley Forsythe’s black pug, Lilo, is 13. “He has been the love of our life,” says Ms. Forsythe, director, family enterprise planning, at BMO Family Office in Vancouver.
As a result, she has left a comprehensive plan for her family should something happen to her and her husband and Lilo is left behind. “There are detailed instructions and a medication outline, and there are vet contact details for our adult kids who have cared for him in the past. It all needs to be thought about,” she says.
Pets are increasingly making their way into estate planning conversations, says Leanne Kaufman, president and chief executive officer of RBC Royal Trust in Toronto. “It’s a much more mainstream topic than it might have been five to 10 years ago.”
Part of the reason, she notes, is a legislative change in British Columbia that recognizes pets as family members rather than property. The change to the province’s Family Law Act earlier this year came after the high-profile case of Stella, a golden retriever caught in the middle of a nasty breakup.
Ms. Kaufman believes the case may set a legal precedent for other provinces about including pets in estate planning. Currently, most provinces, including Ontario, still consider pets as property, meaning they can’t receive gifts left in wills by their owners. Quebec and Alberta consider pets “sentient beings,” which means their feelings matter, but legally, they’re not considered to be family members.
Diana Tebby, a lawyer with Mann Lawyers LLP in Ottawa, says that although a handful of clients have asked about adding pets to their wills, most requests have been around certain rare breeds, pets with longer lifespans such as parrots, and high-value animals such as racehorses.
But Ms. Tebby’s firm now prompts clients to make plans for their pets, ensuring they discuss how much money to leave, what financial vehicle to set up for their care and who will care for them. “We have started to ask as a firm: What happens if you have any pets?” she says.
Setting up a pet plan
Pet owners often spend thousands on food, toys, clothing, caregiving and vet bills. “People love their fur babies as much as they love their family,” Ms. Forsythe says. And after they pass, these bills continue.
To ensure pets are looked after, she urges clients to work with financial advisers or lawyers to ensure their care continues after they pass away. That means including pets in a general estate planning conversation.
The process is about clear and frequent communication between the adviser and client, Ms. Forsythe says, and between the client and future pet caregivers.
“Making the plans, whether they’re informal or more formalized through documentation, is going to give people peace of mind,” she says.
To that end, here are some critical considerations pet owners must make in the process of making these plans:
Communicate wishes. To provide for the pet in the will, Ms. Kaufman says clients should have an emergency plan in place for the period immediately after the client passes away.
“An estate settlement is not an overnight procedure,” she says, noting that it can take weeks to months. As a result, a trusted person or multiple people should be appointed as immediate caregivers for the pet, with money set aside for its care.
Instructions on how to care for the animal should also be drawn up. These can be added to a letter of wishes, a document included alongside a trust that isn’t legally binding but outlines exactly how the owner wants the pet cared for, Ms. Kaufman says.
Select a guardian. A more formal guardian of the pet can be outlined in the will, Ms. Kaufman says, noting this individual can be the same as the trusted person. They have to be amenable to caring for the pet, presumably for a lengthy period of time, and be reliable with the funds they’ll be managing.
“You’re doing a candidate search, in a sense, and you might have two or three people that you’re thinking about,” Ms. Forsythe says.
As for compensation, Ms. Tebby says a portion of the amount can be left to compensate the pet’s caregiver, with the remaining funds going directly to them when the pet passes away.
Determine how much they’ll need. Ms. Tebby says owners need to consider a pet’s projected life expectancy based on its health and age. She also says a financial adviser should discuss the amount of money in the estate vis à vis the amount being set aside for the pet’s care to prevent an estate bankruptcy – resulting in no money remaining for the pet.
Consider a pet trust. While used infrequently, a pet trust is a legal structure in which an owner can leave money to a pet. The trust must be managed by a trustee, who has to file an income tax return on behalf of the trust annually, Ms. Kaufman says.
The main advantages are that the money is managed carefully – rather than potentially pocketed – and the remaining funds can be donated to a charity. The downsides are the administrative hurdles of managing a trust along with compensation for the trustee.
For more from Globe Advisor, visit our homepage.
Editor’s note: A previous version of this article incorrectly stated that a pet is the beneficiary of a pet trust. In fact, the beneficiary is a person appointed by the owner – usually the one tasked with caring for the pet. A pet can't be the beneficiary of a trust.