What Is Reasonable Compensation For A Trustee of a Pet Trust?
Why would anyone chose to serve as a Trustee of pet trust?
Well, for one thing, unless the Trust Instrument has some type of specific prohibition, the Trustee is entitled to "reasonable compensation" for their services as a Trustee.
What is reasonable compensation?
That is a good question and is usually based upon an hourly rate or a percentage fee of the total amount of the Trust.
Bank trust departments will customarily charge an annual fee equal to approximately one percent (1%) of the current value of the trust's assets. They may charge a lower fee, but then add on transaction charges for every action.
If the Trust Instrument provides for specific compensation, you should follow the dictates of that document. If you feel that the compensation provided for in the trust is unreasonable or unduly burdensome, you can either resign as the Trustee or petition the court for additional compensation.
The trustee’s fee is normally paid on a quarterly basis. Remember, compensation (but not expense reimbursements) that is received as a Trustee, is taxable to the trustee, usually as self-employment income.
Some Trustees want to waive the compensation because of their love for the family or animals involved. If you want to do this, make sure that you consult with your accountant about how to document this compensation in the correct manner. Otherwise, you may have taxable income imputed to you even though you do not actually receive it.
The duties and responsibilities of a Pet Trustee are serious and legally binding. Receiving reasonable compensation for the performance of this role is fair and anticipated.
What Are The Duties Of The Trustee Of A Pet Trust?
What are the duties of the Trustee of a pet trust?
I am asked this common question daily.
Generally, the Trustee is considered to have four major areas of duties or responsibilities.
He or she must collect all of the assets that belong to the trust, manage and invest the trust assets, pay all of the applicable debts and taxes as required in the trust document and then distribute the remaining trust assets to the designated beneficiaries as set out in the Trust.
The collection of the assets should be a fairly simple task in that most pet trusts have specific source of easily identifiable funds to be placed into the Trust.
The investments must be in a prudent and reasonable manner, with no self-dealings or commingling (mixing) of personal and trust funds.
Accurate records of all income and expense of the Trust funds must be kept by the Trustee.
The Trustee is usually empowered to hire legal counsel or accounting help to assist in the legal and/or financial affairs of the Trust, to be sure that they are in full compliance with state and federal rules and regulations.
When the Trust ends, the remaining assets are then turned over to the named beneficiary and the duties of the Trustee are ended.
What Is The Role Of The Pet Panel In A Pet trust?
I discussed earlier this week the use of a Pet Panel in your Pet Trust.
This panel of individuals is appointed in your Trust and has various duties as you and your counsel shall provide.
Some example of duties as established for a pet panel, as are follows:
Work with the Pet Trustee to select an appropriate Pet Guardian for each pet;
Make the final decision on accepting or rejecting the choice for Pet Guardian;
Review the Pet Trustee’s performance;
Authorize financial bonuses for the Pet Guardian pursuant to the Trust;
Assist the Pet Trustee and Pet Guardian with major medical decisions affecting the health and lives of the pets;
Select a new successor Pet Trustee to replace the then serving Pet Trustee if there are no other Pet Trustees named or if there are none that are willing or able to serve;
Make occasional, unannounced, in-home visits to monitor the care of the pets;
Assist with end-of-life decisions for the pets, including euthanasia, based on the pets' quality of life, pain and suffering, and chances of meaningful recovery.
Your counsel can assist you with a Pet Panel when you complete your estate planning for your pets.
Looking For a Solid Trustee for Your Pet Trust?
I recently had the pleasure of presenting a Florida Bar CLE class entitled “Estate Planning for Animal Owners,” to a group of attorneys, animal lovers and supporter of the Humane Society of Naples.
The gracious host was Jennifer R. Figurelli of Comerica Bank.
As you are aware, I do not endorse pet products, websites or promoters.
However, Jennifer is a true animal lover, a Trustee of a pet trust and just happens to be a Vice President and a Trust and Estate Administrator for Comerica.
If you have any questions on the administration of your pet trust or are considering the appointment of a pet trustee, you should be confident of any assistance that Jennifer can provide.
Issues to Consider for Your Pet Trust Planning
The American Society for the Prevention of Cruelty to Animals ( ASPCA) is another invaluable site to reference estate planning needs for your pet.
Kim Bressant-Kibwe, Esq. the ASPCA Trusts & Estates Counsel offers assistance to attorneys, financial advisers and executors on all aspects of planning.
Ms. Bressant-Kibwe writes,
“…A pet trust is a legally sanctioned arrangement that provides for the care and maintenance of one or more pets in the event of their owner’s disability or death. The person who creates the trust is commonly referred to as the ‘settlor’. The person who is entrusted with the funds is called the ‘trustee’. A trust can take effect either during a person’s lifetime or after their death. Typically, a trustee will hold property (cash, for example) “in trust” for the settlor’s pet or pets. When the time comes, the trustee will make payments on a regular basis to a designated caregiver. In some states, the trust may continue for the rest of the animal’s life or for 21 years, whichever comes first. Other states allow a pet trust to continue for the rest of the animal’s life without regard to the 21-year limitation. This is especially advantageous when planning for companion animals such as horses and parrots, who have longer life expectancies than cats and dogs.”
She suggests that you contact your attorney to discuss the needs and future estate plans for your pets to establish a pet trust.
Additional areas of concern that she notes that you, your family and your attorney need to consider include;
The appointment of the trustee and successor;
The appointment of the caretaker and successor;
The need to adequately identify your pets in order to prevent fraud;
A description of your pet’s standard of living and care in detail;
A requirement that the trustee ensures the caregiver is providing the pet with regular, thorough veterinary check-ups;
The need to determine the amount of cash or assets needed to adequately cover the expenses for your pet’s care;
The need to determine the amount of cash or assets needed to adequately cover the expenses of administering the pet trust;
Choosing a beneficiary who will receive any remaining funds that were not used by the pet trust; and
Providing directions for your pet’s burial or cremation.
The ASPCA is on one of the many valuable sources of information available to the public regarding the estate planning process for your pets.
If your advisers need assistance or direction, you can help show them the way.
Be proactive in your life. Make your choices, plan and then proceed,
Holding the Pet Trustee Accountable
We recently, visited the responsibilities of the Pet Trustee, see here and determined that their duties mirror those of other Trustees.
In addition to the restrictions imposed in the Trust Agreement , we noted that the Uniform Trust Code also sets out specific expectations for the Trustee.
What happens if the Trustee fails to adhere to the restrictions and steps outside the parameters of the power structure?
If a Trustee is believed to have breached their duties under the Trust Agreement or threatens to do so, what ability does the Court have to control the actions of the Trustee?
Under the common law there were limited remedies available for a breach of duty action again the Trustee. Only the Beneficiary and any Co-Trustee could bring the action and it was a matter for the Court to review.
The legislatures have now provided in most states, that others may represent a Beneficiary if legal action against the Trustee becomes necessary.
In the case of a Pet Trust, the Pet Caretaker would be able to bring an action of the behalf of the Pet.
Generally the Court can order the Trustee to do any number of things, including ordering the Trustee to perform the Trustee’s duties as set out in the Trust or to stop the Trustee from committing a breach of that agreement; order the Trustee to repay money or restore property to the Trust and order the trustee to account for all assets.
In some circumstances the Court can suspend the activities of the Trustee or even remove them from their duties or deny them any compensation for their work.
Many states have also written specific remedies that are available if a Trustee is in violation of their duties. Usually, these remedies are contained within the State's Trust Code and are identical or closely similar to those of the Uniform Trust Code.
Responsibilities of a Pet Trustee
The Uniform Trust Code, adopted by a majority of the states since its initial draft inception in 2000, has been the underlying strength of the new growth phase of Pet Trusts.
We have previously minimally defined the role of the Trustee.
Generally speaking, the duties and responsibilities of a Trustee for a Pet Trust are no more or less than any other Trustee.
The Trust Agreement itself will set out the specific role of the Trustee and set the parameters of the powers of the Trustee.
The Uniform Trust Code also defines in detail, the duties and powers of the Trustee that have been accumulated as established by the courts and the legislatures throughout the years.
Beginning with Section 801, DUTY TO ADMINISTER TRUST, which states…
Upon acceptance of a trusteeship, the trustee shall administer the trust in good faith, in accordance with its terms and purposes and the interests of the beneficiaries, and in accordance with this [Code].
The Code sets out in great detail the expectations of the Trustee, including definitions and explanations of the needed loyalty and impartiality of the Trustee as well as the accumulation, control and accounting of the Trust property.
Your choice of a Trustee for your Pet Trust, whether an organization or an individual should not be taken lightly. Although their responsibilities are set high and can be closely monitored by your Pet Caretaker, you will be out of the picture and the decisions will be made by someone else
You will no longer have control of the property that you have set aside for the care and protection of your pet.
Chose your Pet Trustee wisely.
