Future Returns: Why Fido Needs a Trust

Many well-off pet owners have left millions of dollars to their cats, dogs, and even chickens—perhaps most notoriously Leona Helmsley, who left US$12 million when she died in 2007 to her white Maltese dog Trouble.

But because pets are considered property, individuals can’t directly bequeath money to their dog or cat. Instead, they should make some type of arrangement to care for their beloved animals should they become incapacitated or die, according to Annamaria Vitelli, head of PNC Private Bank Hawthorn.

“Pet trusts are often thought of as something wealthy eccentric folks would do,” Vitelli says. “But now it’s becoming mainstream.”

The reason? Close to 70% of households in the U.S. own a pet, she says, so “70% of households need to think about this.”

Also, as of 2016, all 50 states and Washington, D.C., have created statutory provisions for pet trusts, Vitelli says.

At Hawthorn, pets often come up in wealth planning as advisors get to know and understand the families they work with and recognize the value they place on their critters. As the bank has worked more with families in Texas, they are also having conversations with ranch owners about what will happen to horses that aren’t part of a working farm, but are pets, Vitelli says.

Penta recently spoke with Vitelli about what pet owners need to consider when ensuring the care of their non-human loved ones.

Selecting a Caregiver

Whatever plan a family creates for their pet’s future, the main consideration is designating a reliable caregiver, Vitelli says.

Many pet owners have trusted family members and friends who already lend a hand in caring for their pets. Those who don’t have that kind of social network should research organizations that care for animals or animal sanctuaries that can provide for a pet with money set aside by the pet owner.

Vitelli recalls a client who had a parrot and was concerned about who would care for her bird when she died because some parrots can live for 100 years. “The parrot went to a bird sanctuary with their stipend and was being cared for at the sanctuary,” Vitelli says.

It’s also important pet owners let the caregiver they designate know their intentions and understand what’s involved. “You may have the perfect person in your mind, but you shouldn’t spring it on them at the reading of the will—start talking to them now,” she says.

Some potential caregivers may simply not want to do it, or they may be precluded from taking in a pet for some reason. Also, because a caregiver’s circumstances can change, no longer allowing them to care for a pet, it’s important to name a successor who can step in, Vitelli says.

Picking a Pet Trust

Once a caregiver is selected, pet owners can simply set up an informal arrangement with them that includes funds bequeathed in their will to cover costs. But there is no way to legally ensure that any funds designated this way are used to care for a pet. That may not be an issue for those who can rely on trustworthy family members or friends. But for those who have doubts, or don’t have the perfect person to rely on, it’s best to create a more formal structure.

“As much as we love our pets, the law doesn’t recognize pets as people. They are a piece of property, so once you give that property away, how it’s treated by the person who takes it on is not anything you can enforce,” Vitelli says.

Setting up a pet trust can create that assurance. The simplest is a traditional trust, which would be governed by general trust law. In this case, a pet owner needs to name a beneficiary (the caregiver) and needs to fund the trust with sufficient money to care for the pet. A trust also requires a trustee, most likely another individual who can make sure any funds distributed from the trust are spent according to a pet owner’s wishes, and that the pet is healthy and safe.

“So long as the trust complies with the law of the state in which it is created, and state law enforces conditional distributions from a trust, the care of your pet can be enforced in court,” according to a note to client from PNC Private Bank.

State Law Matters

Another option is a statutory trust, which would be governed by the law of each specific state. As with a traditional vehicle, a statutory trust is enforceable, although it must comply with state law. Because these laws can be wildly different state-to-state, it’s important to work with an attorney who knows the statute and can draft a trust.

Pennsylvania, for instance, requires a trust to end when the last pet covered by the contract dies, while other states may limit the trust’s length to at most 21 years. While that accounts for the life of most pets, many animals can live longer.

PNC advises clients to put a reasonable amount of money in a trust to cover a pet’s needs throughout its life, and to make a plan for unused funds to be returned to their estate. But how much is reasonable? That can be difficult for some families to decide, particularly when they are childless and pets stand in for two-legged family members. “It has more to do sometimes with the endearment of that pet to that family member,” Vitelli says.

Also, some states limit how much money a pet can receive, and, as is the case in Florida, penalize “overfunding.” In the year after Helmsley died, for instance, a Manhattan surrogate court judge reduced her dog Trouble’s inheritance from US$12 million to US$2 million, awarded US$6 million to two grandchildren who had been disinherited, and had the remainder go to Helmsley’s charitable fund.

“You just want to make sure you’re not running afoul of a judge’s sensibilities and state rules,” Vitelli says.

Auto dealers across many parts of the country say electric vehicles are becoming too hard a sell for buyers worried about the range, reliability and price of these models.

When Paul LaRochelle heard Ford Motor was coming out with an electric pickup truck, the dealer was excited about the prospects for his business.

“We thought we could build a million of them and sell them,” said LaRochelle, a vice president at Sheehy Auto Stores, which sells vehicles from a dozen brands in Virginia, Maryland and Washington, D.C.

The reality has been less positive. On Sheehy’s car lots, LaRochelle says there is a six- to 12-month supply of EVs, compared with a month of gasoline-powered vehicles.

With automakers set to release a barrage of new electric models in the coming years, concerns are mounting among auto retailers about whether the technology will have broader appeal given that many customers are still reluctant to make the switch.

Battery-powered models have been piling up on car lots, dealers say, as EV sales growth has slowed in the U.S. this year. Car companies have been offering a combination of discounts and lower interest-rate deals in an effort to juice demand. But it hasn’t been enough, because buyer reticence extends beyond the price tag, dealers say.

“I’m not hearing the consumer confidence in the technology,” said Mary Rice, dealer principal at Toyota of Greensboro in North Carolina. “People aren’t beating down the door to buy these things, and they all have a different excuse why they aren’t buying one.”

Customers cite concerns about vehicles burning through a battery charge faster in cold weather or not being able to travel as far as they expected on a single charge, dealers say. Potential buyers also worry that chargers aren’t as readily accessible as gas stations or might be broken.

Franchise dealerships fear that the push to roll out new models will inundate them with hard-to-sell vehicles. Research firm S&P Global Mobility said there are 56 EV models for sale in the U.S. this year, and the number is expected to nearly double to 100 next year.

“I start to think, you know maybe we should just all pump the brakes a little bit,” Rice said.

A group of dealers expressed their concerns about the government’s role in pushing electric vehicles in a letter last month to President Biden.

A Toyota Motor spokesman said the majority of dealers have become “increasingly more confident in their ability to sell Toyota EV products.”

At Ford, the company’s electric-vehicle sales are rising, including for its F-150 Lightning pickup, but demand isn’t evenly spread across the country, according to a spokesman.

Dealers say that after selling an EV, they sometimes hear complaints about charging and the vehicles not always meeting their advertised range. In some cases, customers seek to return them to the dealer shortly after buying them.

“We have a steady number of clients that have attempted to or flat out returned their car,” said Sheehy’s LaRochelle.

While EVs remain a small but rapidly expanding part of the new-car market, the pace of growth has slowed this year. Electric-vehicle sales increased 48% in the first 11 months, compared with a 69% jump during the same period in 2022, according to Motor Intelligence. Sales remain concentrated in a few states, with California accounting for the largest chunk, S&P Global Mobility data found.

The cooling growth has raised broader questions in the industry about whether car companies face a temporary hurdle or a longer-term demand challenge. Automakers have invested billions of dollars to bring more EV models to the market, and many analysts and car executives say they remain optimistic that sales will continue to expand.

“Although the rate of growth has slowed recently, EV demand is clearly moving in the right direction,” said General Motors Chief Executive Mary Barra on a recent conference call with analysts. A combination of more affordable model options and better charging infrastructure would help encourage more people to buy electric vehicles, she said.

There are also varying views within the dealer community about how quickly buyers will adopt the technology.In hot spots for electric-vehicle demand, such as Los Angeles, dealers say their battery-powered models are some of their top sellers. Those popular EV markets also tend to have more mature public charging networks.

Selling an electric car or truck outside of those demand centres is proving more difficult.

Longtime EV owner Carmella Roehrig thought she was ready to go full-electric and sold her backup gasoline vehicle. But after the 62-year-old North Carolina resident found herself stranded last year in a rural area of South Carolina, she changed her mind. Roehrig’s Tesla Model S got a flat tire, but none of the stores in the area carried tires for a Tesla. She ended up paying a worker at a nearby shop to drive her home.

Roehrig still has her Tesla but bought a pickup truck for long road trips.

Tesla didn’t respond to a request for comment.

“I have these conversations with people who say we’ll all be in EVs in 15 years. I say: ‘I’m not so sure. I’ve tried to do it,’” Roehrig said. “I think you need a gas backup.”

Customers who want to ditch their gas vehicle for environmental reasons are sometimes hesitant, said Mickey Anderson, president of Baxter Auto Group, which owns dealerships in Kansas, Nebraska and Colorado.

“We’re in the Colorado Springs market. If this is your sole mode of transportation, and you’re in a market in extremes of elevation and temperature, the actual range is very limited,” Anderson said. “It makes it extremely impractical.”

Dealers representing around 4,000 stores across the U.S. signed the letter in November addressed to Biden, saying the administration’s proposed auto-emissions regulations designed to promote electric-vehicle sales are unrealistic. The signatories ranged from stores owned by family businesses to publicly held giants such as AutoNation and Lithia Motors.

“Some customers are in the market for electric vehicles, and we are thrilled to sell them. But the majority of customers are simply not ready to make the change,” the letter said.

Some carmakers are pushing back EV-rollout plans. GM said in mid-October that it would delay the opening of an electric pickup plant by a year to late 2025. In response to weaker-than-expected consumer demand, Ford said in late October that it would defer $12 billion of planned spending on electric-vehicle investment.

Since September, dealers on average took more than two months to sell an EV, compared with 40 days for all vehicles, according to car-shopping website Edmunds.

While discounts have helped boost sales of some electric vehicles, they also have led to repercussions for some current owners because it reduces the value of their vehicles, dealers say.

“Most people don’t have the confidence to buy an EV and know what it will be worth in 10-15 years,” said Rice from the Toyota dealership.

It may take some time for the industry to adjust because it is still in an early stage of switching to electric vehicles, Sheehy’s LaRochelle said.

“We’re asking for this market to grow organically,” he said.

Future Returns: Why Fido Needs a Trust

When it comes to estate planning, pets need to be considered, too.

Concern about electric vehicles’ appeal is mounting as some customers show a reluctance to switch