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Pet trusts allow owners to set aside funds for ongoing pet care, presumably when the owner can no longer provide care themselves. With a pet trust, the grantor – the pet owner in most cases – funds the trust and names a trustee to manage it. This is usually a close family member or friend.

For the purposes of estate planning, pets are considered property. As such, they cannot be given money or assets. Instead, control of those assets must be given to a person or organization who assumes care for the pet. A pet trust is the medium through which this is arranged.

If you are concerned about your beloved pet’s well-being after you can no longer care for them, a pet trust ensures they are provided for.

Why Pet Trusts are Important: A Tale of Two Horses

For this topic, we spoke to friend-of-the-firm and horse veterinarian Ciera Guardia of Guardia Equine. Ciera has worked with horse owners for years and has seen the benefits of establishing a pet trust firsthand. Here are two real-life examples from her practice:

• The horse with a trust – One of Ciera’s clients battled chronic illnesses for years prior to her passing, so she established a pet trust for her beloved horse well in advance. Upon creating the trust, she named her daughter as the trustee. It’s been a few years since Ciera’s client has passed, but her horse remains cared for. In fact, Ciera continues to provide vet services to the client’s daughter, who pays her using a card tied to the trust account. For the horse, quality of life is not a concern.
• The horse with no trust – Many of Ciera’s clients do not set up a pet trust for their horses before they pass. For example, one client had several horses – some with special health needs – who were not provided for in a will or trust. When the client passed, no one in the family was interested (or had the means) to take the horses in. The fate for horses in this situation can be grim. Some may waste away in an abandoned pasture. Some may be redirected to a food chain in another country. To prevent this, and in light of some of the horses having special medical needs, the decision was made to humanely euthanize the animals.

A pet trust gives owners peace of mind, knowing that the resources will be there to care for their pet. However, a trust is only one part of the estate planning equation if a pet is involved. You will also need a will.

Wills and Trusts: Why it’s Important to Have Both for a Pet

Pet trusts provide the funds necessary for ongoing care, but they do not establish how care is to be provided. That’s what a will does. A will allows you to do the following:

• Establish a pet trust upon your death or upon becoming incapacitated
• Name the person who will oversee pet care
• Name the person in charge of your pet trust (the trustee)
• Specify preferences for a veterinarian or pet care team
• Specify preferences for retiring or donating the pet to an animal-focused organization
• Specify the conditions under which it would be appropriate to humanely euthanize the pet
• Specify a disposition method for the pet (burial vs. cremation)

If you are setting up a pet trust, chances are that you have an idea of how care should be administered. A will ensures those desires are known and carried out to the extent that they can be.

Testamentary vs Living Pet Trusts: Which is Better for Pet Care?

There are many types of trusts that can be used for estate planning purposes, but pet trusts generally fall into one of two categories – testamentary trusts or living trusts (sometimes termed intervivos trusts). Here’s a summary of both:

 

• Testamentary trusts – A testamentary trust is a trust that’s established through a will, upon the grantor’s death. In effect, this means the pet trust does not exist until the grantor dies. This can be an issue if the grantor is incapacitated and can no longer care for their pet. Assets designated for a testamentary trust must also pass through probate, which can be expensive and time consuming for families.
• Living, or intervivos, trusts – Living trusts are established while the grantor is still alive and for as long as they are funded. It’s common for grantors to act as the trustee for their own pet trust while alive, and to set conditions for when the trust should be passed on to a successor trustee. This could be when the grantor dies or when they are medically incapacitated. Funded living trusts also do not pass through probate. They’re passed on to the beneficiary or successor directly.

 

Our firm recommends setting up a living trust whenever possible, but every client’s situation is different.

 How Much Money Does a Pet Trust Need?

 The biggest factors to consider when funding a pet trust include:

 

• The pet’s age and expected lifespan
• The pet’s overall health (do they have any chronic illnesses?)
• The types and cost of any medications
• Where the pet will be housed or boarded
• The people you’ll need to continue care (veterinarian, caretaker, etc.)

 

Some pets – horses for example – may be sent to retirement facilities or pastures to live out their golden years. This cost should also be factored in. A veterinarian can provide expert insight into the above, so consulting with your vet before establishing a pet trust is recommended.

 

How Much is Needed to Fund a Pet Trust?

As for funding a pet trust, your accountant can help with that. And it is important to consider how much you are setting aside in the trust.

For example, some people greatly overfund their pet trust. Once their pet passes, there may be a small fortune left in the account. In return for caring for their pet, many grantors decide to give the trustee whatever is left in the account. Consider, though, the potential incentive that this arrangement sets up – the trustee stands to inherit a lot of money when the pet dies. You’ll want someone you can rely on in that role. Alternatively, grantors can avoid overfunding the trust to a large degree.

This and other trust-related considerations can be complex. Your accountant and attorney, though, can make sense of them for your situation.

Your Estate Planning Attorney or Accountant Can Create a Pet Trust in Your Name

Wills and trusts are vital estate planning tools, and a pet trust ensures your furry family members are considered as well. If you have pets that are dear to you, consult with your estate planning attorney to determine how a pet trust can protect your cherished animals.

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Everyone engaged in an income-generating activity needs a tax plan, even if those income-generating activities are criminal in nature. To be clear, we aren’t interested in furthering criminal activity, but hiding income from the IRS means taking a major risk – for every taxpayer.

To illustrate this point, consider the case of Al Capone.

How Tax Evasion Charges Brought Down Al Capone

Al Capone was one of history’s most notorious gangsters. His criminal enterprise was active in Chicago for years during the early 20th century – an enterprise that included murder. Capone’s activities were no secret, but he never committed the crimes himself, instead delegating them to underlings. This made it impossible for authorities to pin any of the crimes on him personally, as he always had a rock-solid alibi.

But Capone made a mistake that would eventually topple his empire – he refused to accurately report his income to the government.

Murder was impossible to prove, but it was easy for IRS agents to prove that Capone’s income and account activity did not match his tax reports. Eventually, this led to Capone’s arrest and charges of tax evasion, which he was convicted of. The legendary mob boss, a man always one step ahead of the Chicago police, was sentenced to 11 years in federal prison.

If only he had planned and filed his taxes properly, Capone may have avoided prosecution until the end of his criminal career.

That’s why we say that everyone, no matter their occupation, should focus on accurate tax reporting and planning with a knowledgeable tax attorney.

What’s the Difference Between a Tax Plan and Just Filing Taxes?

Capone didn’t report and file his taxes properly – a process known as tax preparation. That made tax evasion charges much easier to prove.

We recommend taking tax preparation seriously, of course, but your situation may call for a long-range plan that goes beyond mere reporting filing. What you need are tax planning services.

What’s the difference between a tax plan and tax preparation?

• Tax preparation services – During tax preparation, your tax professional will identify the right tax forms for your situation and ensure they are filed accurately and on time. If you’re unsure about tax forms, deductions, credits, or any other tax fundamentals, these services can maximize your savings.
• Tax planning services – Tax planning is a forward-looking service that accounts for your future tax goals and decisions. For example, if you’re starting a business soon, tax planning may involve picking the right tax structure, setting up business accounts, and scheduling income/expenses. Tax planning is also appropriate for individuals with income-generating assets. As such, there’s a lot of overlap with estate and tax planning services.

You can think of tax preparation as ensuring ongoing compliance, while tax planning is more about maximizing your tax savings.

Three Reasons to Invest in Tax Planning Services

Tax planning services are an investment, because like all investments, they’re expected to provide a return. Here’s how a tax plan does that:

• Tax planning ensures ongoing compliance – Tax preparation is meant for on-the-spot compliance, through proper filing and reporting. Tax planning establishes long-term compliance controls that, if consistently observed, will ensure you remain compliant year over year.
• Tax planning optimizes your savings and liabilities – The goal of tax planning is to position clients in the most advantageous way possible, relative to existing tax laws. As such, tax planning can be extremely complex and requires an expert reading of the tax code. Tax planning professionals leverage their knowledge in this area to maximize deductions and credits, while minimizing their client’s taxable income. To do so, tax planners typically recommend (and support) strategies that develop over many months or years. These strategies may involve highly complex transactions that must be executed properly.If tax plans aren’t developed ahead of time, you’re likely leaving money on the table. At the least, you’ll spend a lot of time making tax-related adjustments in real time.

   

• Tax planning takes your unique situation into account – There are numerous tax planning strategies, but only some of them will apply to your situation. You may own a business, or you may have inherited an income-generating trust or estate. You may be interested in acquiring real estate. You may be self-employed with a home office. You may earn income trading securities or other assets. Whatever your situation, there is a tax planning approach that makes the most sense for you. When working with a professional tax planner, they will quickly ascertain how to deliver maximum results for your tax situation. In this way, expert tax planners create customized strategies for their clients.

 Tax Planning Services Can Help Every Taxpayer – Even Mob Bosses

Chances are, you aren’t running an organized criminal outfit, but if you earn taxable income, you have one thing in common with Capone and other criminal masterminds – you need a tax plan and proper tax preparation. CPAs and tax attorneys are the experts in this area, with deep knowledge of tax laws and how to apply them. This means a trusted tax planner can customize tax minimization strategies to fit

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Secured transactions involve the use of collateral to secure a financing agreement. In most cases, the obligor (the creditor) provides a loan to the obligee (the borrower) in exchange for first rights to the secured property, should the obligee fail to uphold their obligation.

Secured transactions may involve many types of collateral. Most states, including Texas, have a Uniform Commercial Code that dictates how this collateral is secured.

It is crucial to have a reputable Houston attorney on your side when any agreement of this nature is created to ensure you are informed, protected, and that terms within the agreement are enforced.

What Assets Can Be Used as Collateral for Secured Transactions?

 A variety of assets, both tangible and intangible, may be used as collateral to establish a security agreement. The Uniform Commercial Code (UCC) defines more than 20 categories of assets eligible for this purpose. Some examples include:

• Equipment
• Inventory
• Machinery
• Buildings
• Land
• Securities
• Account receivables
• Mineral rights
• Farm products
• Patents

The UCC defines how the above assets are managed during a secured transaction, but there are exceptions. Most notable is real property. Land and buildings are governed by the state’s property law. And in Texas, a deed of trust is used as the security agreement when real property is put up as collateral.

What is the Uniform Commercial Code in Texas?

The Uniform Commercial Code is one of the nation’s most expansive and oldest uniform acts, dating back to the 1950s. It is used to standardize certain aspects of commercial transactions. Specifically, the UCC governs the creation and administration of some business contracts and liens.

All 50 states have their own version of the UCC. There are minor variations between them, but in general, the UCC ensures commercial contracts and lien instruments are treated the same in every state.

Article 9 of the UCC addresses secured transactions and what requirements must be met before an obligor has established a security interest in the collateral. Most importantly, the obligor must submit a financing agreement and security agreement to the relevant government office – typically the Secretary of State.

The Role of Financing and Security Agreements in Secured Transactions 

Before a creditor can claim rights or security interests with the collateral, the transaction must be “perfected.” In this context, perfection means the obligor takes the steps necessary to make the transaction official. In doing so, the lender asserts their first priority over the collateral in the event that the debtor fails to make payments.

There are a few ways to achieve transaction perfection, but the most common way to do it is to file a financing statement and security agreement under UCC provisions. Here’s a brief explanation of each:

• Financing statements – Also termed Form UCC-1, creditors file a financing statement to detail the parties involved in the transaction, along with the collateral that will be used to secure it. Form UCC-1 is used by government agencies and other creditors to track which assets have been secured by which creditors. Financing statements do not establish a security interest in the collateral. To do that, a security agreement must be submitted to the relevant government office.
• Security agreement – Security agreements give creditors a security interest in the named collateral. With this interest, the creditor may take possession of the assets should the debtor fail to meet the agreement’s terms.To establish a security interest, there must first be a security agreement. Put simply, there must be a written record confirming that both parties – the obligor and obligee – agree to granting the obligor a security interest in the property.Further, there must be a specified value associated with the collateral. This is usually defined when the creditor lends money or when the debtor begins payment. Finally, the debtor must have partial or total rights to the collateral.If the above prerequisites are met, the security agreement will serve as notice to other creditors that the creditor has first rights to the collateral.

An important note – security agreements are based on a “first file, first serve” basis. In other words, whichever creditor submits the security agreement and UCC-1 form first will be considered the priority creditor should the collateral assets need to be liquidated.

How an Attorney Can Help with a Secured Transaction

 Secured transactions are an active part of law. As such, it’s highly recommended that both parties have legal counsel throughout the process.

A reputable attorney with experience in secured transactions should be on hand when the security agreement is initially formed, during closing, when payments are being made, and if any disputes arise while enforcing the contract. And disputes are extremely common.

Legal representation is especially important for creditors, for a couple of reasons:

• Protecting the creditor’s rights – An attorney can preserve as many protections as possible for both the debtor and creditor. On the creditor’s side, this protection is necessary to prevent any exposure to legal liability.For example, the UCC does not determine when a secured transaction has entered into default. This is something that must be specified in the security agreement so the creditor can engage in collections without violating UCC provisions.Another example – if a creditor does opt to liquidate collateral, it must do so in a “commercially reasonable” fashion. In other words, the creditor must make reasonable, provable efforts to extract maximum value out of the collateral.This is a gray area that regularly provokes litigation from the debtor’s side. An attorney can guide creditors through this process so they can demonstrate commercially reasonable efforts and avoid a lawsuit. Secured transactions are littered with potential legal liabilities like this, which is a primary reason why creditors seek legal counsel before executing one.
• Ensuring the security agreement is enforceable – A security agreement is not enforceable until it is properly drafted, written and perfected. Any minor mistake during this process can have major consequences. An attorney will provide counsel through this process to ensure the agreement is enforceable.For example, if the security agreement is not attached to the UCC-1 form when the contract is finalized, the collateral is not secured. Another creditor could jump in with their own security agreement claiming the same assets and attain first rights. Until the agreement is perfected, the debt is unsecured – which is a risky position to be in for a creditor.

An Attorney Can Help Your Organization Make Sense of Secured Transactions

Secured transactions are complex. If they aren’t executed in accordance with UCC provisions and aren’t perfected, it could expose your organization to excessive, and unnecessary, liability.

It’s important to work with a reputable attorney that is experienced with establishing secured transactions, including developing the security agreement terms and ensuring they are enforced. In short, this will ensure your organization is protected and entitled to the assets it has secured.