Personal Trusts in Estate Planning

Family pets can be of utmost importance for estate planning purposes.  The recent case from the Saskatchewan Court of Queen’s Bench brought clarity into the court’s treatment of family pets. In that case, a husband and wife were divorcing and could not agree on where their two dogs should live. The wife wanted the court to treat the case like a child custody dispute. However, Justice Richard Danyliuk ruled that dogs are property and should not be treated like children. The case may leave pet owners wondering what will happen if their pets outlive them and how they can ensure the safety of their pets after they die.

Families with pets tend to be very concerned about their pet’s well-being. This is a common concern in Canada, as more than half of Canadian homes have a cat or a dog. It is currently difficult to provide for pets in a will, as they are considered property (as highlighted by the recent Saskatchewan case). In the worst-case scenario, a family member or friend tasked with dividing up your property after your death may end up giving the pet away or handing it over to a shelter.

Pet owners may seek out an informal arrangement with a family member, friend, or other caregiver. However, some people may wish to make an arrangement that is legally binding. Testators may gift their pet to a caregiver, along with a specific sum of money to cover pet care costs. It should be noted that a gift carries no requirement for the beneficiary to care for the animal, or use the money provided towards the pet’s care.

Property versus Sentient Beings

Some countries have passed legislation that changes how pets are classified from “property” to “sentient beings”. Under US law, testators can set up a “Pet Trust” in their will. However, under Canadian law, Pet Trusts do not have similar recognition. That is because there is no person with legal standing recognized under Canadian law to enforce the Pet Trust, since pets are unable to properly enforce the trustee’s duties. This may change if pets are reclassified to “sentient beings” under Canadian Law. However, a change to legislation has yet to occur.

So how can pet owners ensure their pets are properly cared for after they pass away? One potential available option for Canadians is to establish a “Personal Trust” or “Charitable Purpose Trust” in their will. A trustee has the power to monitor the beneficiary’s caregiving duties to ensure the pet is cared for pursuant to the testator’s wishes. Along with the trust document, the testator could include a memorandum addressing the standard of care for the caregiver beneficiary when caring for their family pet.

Charitable Purpose Test

In the Charitable Purpose Trust, the testator would name a primary beneficiary of the trust. The trustee would be granted discretionary powers to distribute funds to the caregiver, and the caregiver would use the funds to care for the family pet according to the testator’s standard of care. After the family pet passes on, the balance of the Charitable Purpose Trust money could then be passed to a named charity of choice aimed at benefiting the well-being of animals.

Alternatively, Canadians could set up a “Personal Trust”. Again, the caregiver would be named as a primary beneficiary of the trust and the trustee would be granted discretionary powers to distribute the funds to the caregiver. The caregiver would care for the pet pursuant to the testator’s wishes. However, in the Personal Trust, after the pet passed away, the balance of the trust funds would pass to certain named residual beneficiaries.

However, the trusts outlined above are not without risk or complexity. For example, a trust may not be suitable for pets with a long lifespan, such as a parrot. As well, a court may still be asked to vary the amount in the trust. If the testator’s dependants feel they were not adequately provided for in the will, then dependant’s can pursue a “Dependant’s Relief Claim” to vary the amount awarded to them under Ontario law. If you need help structuring your estate plan, contact Conduct Law.

About Conduct Law

Conduct Law is an Ottawa based business law firm with locations in Ottawa, Barrhaven and Kanata. Our professionals are experienced business lawyers who can help with estate planning, commercial real estate, liens, incorporations, trademarking or implementing corporate structures that manage tax obligations, whether as a corporation, partnership, family trust, testamentary trust, or any other type of legal entity.

Feel free to call or write one of our professionals at info@conductlaw.com or 613.440.4888 for all of your business, commercial, real estate and estate planning needs.