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.

Fortunately, unlike many states, Texas does not require holders of stock breeder’s liens to file suit or involve the courts in order to enforce their liens—provided the enforcement provisions in the statute are precisely followed.

If you own or stand a stallion and a mare owner does not pay for the breeding services, you have a stock breeder’s lien on the resulting foal (but not the mare) under Section 70.201 of the Texas Property Code. You may sell the foal in a public sale and apply the proceeds to the unpaid stallion fee and related service charges. Your lien remains in force for 10 months after the date the foal is born, but importantly, it cannot be enforced until 5 months after the date the foal is born.

Note: If you are in possession of the mare that was bred and the owner has not paid for board on the mare, you may also have a stable keeper’s lien on the mare and may enforce it as set forth in my previous blog entry, How to Enforce Texas Stable Keeper’s Lien.

STEP 1

As soon as it becomes apparent that the mare owner is not going to pay for the breeding services, it is advisable (but not required) that you file a UCC Financing Statement putting the world on notice that you have a lien on the resulting foal (whether born or unborn at the time the debt accrues) for unpaid stallion service. The Financing Statement is best filed in both the county where you stand the stallion as well as with the Texas Secretary of State. Be sure to provide sufficient information in the Financing Statement to identify the foal (registered names and registration numbers of your stallion and the mare; date and place of stallion service, etc.) Instructions on filing the Financing Statement can be found at the Texas Secretary of State’s website.

STEP 2

When the foal turns 5 months of age, send a notice of sale to the debtor.  For a form of the notice of sale, click here.

STEP 3

Sell the foal at a public sale 30 days or more after you send the notice of sale referenced in Step 2.

Note: If you are not in possession of the foal when it becomes 5 months of age, you may need to take your notice of sale and UCC Financing Statement to the sheriff’s office of the county where the foal is located and have them help you seize the foal so it can be sold.

Fortunately, unlike many states, Texas does not require lien holders to file suit or involve the courts in order to enforce the stable keeper’s lien—provided the enforcement provisions in the statute are precisely followed.

If you are boarding someone else’s horse, the board bill is 60 days or more past due, and you still have possession of the horse, you have an enforceable stable keeper’s lien under Section 70.003 of the Texas Property Code and may sell the horse in a public sale to satisfy the debt.   In order to enforce a stable keeper’s lien, you must follow the following steps:

STEP 1

If the owner’s residence is not in Texas or not known, you do not need to send the notices set forth in Step 1 and Step 2 below. You may sell the horse at a public sale without notice to the owner—provided the board bill is at least 60 days’ past due and you have possession of the horse. Still, it is advisable that you keep some proof that you billed the customer and they did not remit payment before proceeding with the sale.

If the owner’s residence is in Texas and known, you start the lien enforcement process by sending a demand for payment by certified mail and regular mail to the owner’s last known address.  Form Demand Letter.

STEP 2

If the owner does not pay the amount owed before the 11th day after the date you sent the demand letter referenced above, send out a notice of sale by certified mail and regular mail to the owner’s last known address.  Form Notice of Sale.

STEP 3

Sell the horse at a public sale 20 or more days after you send the notice referenced in Step 2.   

Note: If you are fortunate enough to get more for the horse at auction than you are owed, you must pay the overage to the owner. If the owner has moved out of Texas or its residence is unknown, you must pay the overage to the county treasurer of the county in which you boarded the horse.

Remember—the stable keeper’s lien is a possessory lien. This means that if you give the horse back to the owner before the bill is paid, the stable keeper’s lien is, practically speaking, no longer enforceable. In that case, you will need to file suit against the debtor to collect the unpaid board. This is why it is essential to obtain a written board agreement from every customer that contains the date you started boarding the horse, sets forth your fee for board, and includes an agreement that your customer will pay out-of-pocket expenses for care such as worming, farrier, supplements, and vet work.

Who has a stock breeder’s lien, and to which animal(s) does the lien apply? An owner or keeper of a stallion, jack, bull, or boar confined to be bred for profit has a preference lien on the offspring of the animal for the amount of the charges for the breeding services, unless the owner or keeper misrepresents the animal by false pedigree. In the case of a stallion, the lien would be on the foal resulting from the breeding, but would not extend to the mare that was serviced by the stallion.

How long does the stock breeder’s lien last? The stock breeder’s lien remains in force for 10 months from the day that the foal is born, but the lien may not be enforced until five months after the date of birth of the foal. The lien exists during these time parameters, regardless of whether the mare or foal is still in the possession of the stallion owner.

How is the stock breeder’s lien enforced? Your foreclosure has to comply with Sections 54.044 and 54.045 of the Texas Property Code. The stallion owner would seize the foal produced by the stallion, usually with the assistance of the sheriff’s department. Before selling the foal at public auction, the stallion owner must first send the mare owner a written notice complying with Section 54.045 of the Texas Property Code.

This entry addresses only the law in Texas.  The University of Vermont’s website, Equine Law and Horsemanship Safety, provides a list of breeder’s liens in other states (scroll to bottom to find your state).

Texas law provides liens for two specific types of services provided to horse owners: boarding services (the stable keeper’s lien) and breeding services (the stock breeder’s lien).   This blog provides an overview of the stable keeper’s lien.

How does a stable keeper’s lien work? The Texas stable keeper’s lien, also known as an “agister’s lien,” is a possessory lien that applies when one person takes care of horses or other livestock of another by providing board or pasture for the horse or other livestock. If you run a stable or keep other people’s horses on your land or land you are leasing, you may keep possession of the horse until your board bill is paid by the horse owner. If the nonpayment persists, you can have the horse sold to collect the amount owed.

How do I foreclose on a stable keeper’s lien? Your foreclosure has to comply with Section 70.005 of the Texas Property Code. Under that section, you must: 1) have possession of the horse for 60 days after the date the charges accrue; 2) make a written request to the owner to pay the unpaid bill; and 3) if the charges are not paid on or before the 11th day after you made demand for payment, you may sell the horse at public auction after giving the horse owner 20 days’ written notice.

What if someone is interested in buying the horse? Can I sell it to them or does it have to be sold at an auction? Texas law provides that you must sell the horse at a public sale. This is to prevent boarding facilities from selling a horse worth a lot of money to a friend for much less than the horse is worth, just to satisfy the debt. To get around the public auction requirement, boarding facilities can draft clauses into their boarding agreements allowing them to sell to horse by private treaty. The boarding contract may also provide for interest and late fees for past-due board.

My boarder left a lot of tack at my barn and did not pay their board. Can I keep or sell the tack to satisfy the bill? No. The stable keeper’s lien only covers the horse itself. Boarding facilities may not hold tack or other equipment as security for payment of past-due board. Again, a boarding facility may draft a clause into their boarding agreement allowing them to keep or sell tack or other equipment belonging to a boarder who does not pay their bill.

This entry only addresses the current law in Texas.  The University of Vermont’s website, Equine Law and Horsemanship Safety, provides a list of agister’s lien statutes in other states
(scroll to bottom to find your state).