Member Article

Prepare proper pet protection to avoid legal problems

Almost 40 per cent of households in the North West[1] have at least one pet and research[2] has shown the majority of owners plan to leave money for the care of their pets in their will, but many don’t realise the legal implications of doing so. As Make a Will Month draws to a close, national law firm Mills & Reeve, which has an office in Manchester, is urging local pet owners to seek legal advice when planning to provide for their pets, or face potential legal pitfalls.

Deborah Clark, Manchester-based Head of Private Tax and Trusts at Mils & Reeve, warns: “People often make the mistake of leaving money in their will directly to an animal or simply putting a sum of money into their will for the animal’s care. However, a pet is not a legal entity in the eyes of the law and, as such, cannot claim assets. Legally the assets must be left in trust with a reliable administrator or passed on to a named legatee. It is important to remember though, that any capital or income producing assets left in a will to an individual legatee or a specific person under a trust will have to be declared in relation to the calculation of any means tested benefits which that beneficiary is in receipt of. Otherwise the beneficiary will likely be committing fraud.”

A recent legal case highlighted this issue when a cat lover’s unwitting daughter was left with £50,000 to care for 14 Persian cats and several kittens. Although the money had been put in trust to pay solely for the animals’ care, the legatee continued to claim pension benefits and as such, was taken to court on charges of fraud. Once it was proven the money had in fact been spent on the cats, the Judge ruled in her favour, but Deborah says “the result could have been very different had there been no way of proving where the money had gone, as the legatee would have faced serious charges.”

Deborah further advises that without taking appropriate advice, leaving funds to a trust for the care of an animal can also be problematic: “A trust for the care of an animal would be a trust for a purpose and not a beneficiary. It is very difficult to establish this type of trust meaning that in all likelihood the gift will fail and not be used to benefit the pet as intended.

“The alternative is to create a legally enforceable structure which would be prepared with a lawyer. Money could be left under the will to trustees on the terms of a discretionary trust for the benefit of selected beneficiaries, including the person/s who agrees to look after the pets. Discretionary trustees use their judgment to decide which beneficiary should benefit from a trust, when and by how much, meaning the trust assets do not belong to any beneficiary and therefore they do not need to be declared for any beneficiary’s means assessment. A carefully drafted letter of wishes left with the will would then guide the trustees to appoint the trust fund out to the specified pet carer beneficiary to reimburse their expenses. The terms of the will could also give the trustees the power to add any additional animal carers as beneficiaries as required.”

Deborah alternatively points out that assets can also be left in trust to an animal charity or welfare organisation and this would avoid any individual beneficiary worrying about their benefits position. The trustees could pay out the funds to the charity while the pet is in the charity’s care and then, should the pet be re-homed, the rest of the money could be given to the charity as a charitable donation. There may even be Inheritance Tax advantages in leaving a gift in this way.

“Whichever option is decided on, it should always be discussed with a qualified lawyer to ensure it not only fulfils your pet’s needs, but adequately protects those you ask to be carers. Cats may have nine lives, but humans do not, so be sure to make adequate legal provision for your pets and give yourself complete peace of mind,” concluded Deborah.

[1] Source PFMA Regional Pet Survey 2012

[2] MORE TH>N Pet Insurance 2011

This was posted in Bdaily's Members' News section by Mills & Reeve, Manchester .