With the development of “pet trust” statutes in several states over the past 10 years, and the story of Leona Helmsley’s Maltese dog, “Trouble”, who inherited $12 million upon Helmsley’s death, stories about the establishment of trusts for the care of animals seem to have been increasingly covered in media stories. Most recently, Veronica Dagher of Wall Street Journal’s personal finance blog, Total Return, published this informative blog post about equine trusts in the United States.
Dagher’s post sets forth a number of reasons why establishing a trust for a horse, as opposed to naming a horse in a will, might be a good idea:
- Wills can be contested if a family member is upset that horses are left a substantial sum of money (this happened in the case of Helmsley’s dog);
- Even if a will is not contested, it must sometimes pass through probate, which could delay care of the horses;
- If a client leaves a substantial sum of money to an heir that is intended to be used to care for horses, the heir might not use the money for the intended purposes;
- The beneficiary receiving title to the horses under a will might not want the horses.
The above factors can indeed cause problems upon the death of a horse owner, and therefore a trust might be a prudent estate planning alternative for many Texas horse owners.
The Texas Legislature passed Texas’s animal trust statute in 2005, and it became effective on January 1, 2006. Our statute is found in Section 112.037 of the Texas Property Code, a link to which can be found here.
Texas’s statute allows a trust for the care of an animal to be established by a living person. The animal named in the trust must be alive during the settlor’s lifetime (i.e. a trust cannot provide for the care of the unborn offspring of a living horse, due to the rule against perpetuities). Under Texas law, an animal trust terminates upon the death of the animal or, if the trust is created to provide for the care of more than one animal alive during the settlor’s lifetime, on the death of the last surviving animal.
In Texas, a settlor can appoint a guardian to care for the horse using the trust proceeds. This person should be one who is willing and able to properly care for the horse(s), and is familiar with costs associated with proper horse husbandry.
Texas law does have a provision that would allow property of an animal trust to be applied to a use other than the property’s intended use under the trust (i.e. care of the animals named in a trust) if a court determines that the value of the trust property exceeds the amount required for the intended use.
If the value of trust property is judicially determined to exceed the amount required for the care of the horse(s), the funds are required under Texas law to be distributed to 1) the settler, if alive at the time the trust property is distributed; 2) the beneficiaries of a settlor’s will, if the settler has a will; or 3) to the settlor’s heirs, if the settler does not have a will or an effective provision in the settlor’s existing will.
As such, horse owners who establish a trust for the care of their animals might use a “belt and suspenders” approach, whereby the horse owner’s will clearly sets forth their intentions for all property of the animal trust, should it for some reason not be used for the purposes set out in the trust instrument.