Summary:
Use a trust, an honorary trust or a power of attorney for the care and feeding of your pet.

Those family members with four legs, fins, feathers or fur can be remembered in a will providing for their care after their owners go to that great pet store in the sky.

What a person can do to provide for a pet depends on state law. But generally, you can prepare for a pet in three ways:

• A special power of attorney. This authorizes someone to spend your money caring for your pet if you become ill or disabled. The authority expires when you die.
  
• A will. This appoints a caretaker for your pet and provides resources for its care. This provision should be carefully drafted so payments to a caretaker aren't considered taxable compensation for taking care of the pet.
  
• A trust. This appoints a trustee (person or organization) and directs how to invest trust assets and to whom they should be distributed. Bequeath the pet to the trustee, in trust, to deliver it to the appointee. Trust income taxes will be due by the person receiving the income. If the pet's expenses are paid by the trust, it owes the taxes. The trust terms can be part of your will or in a separate document effective during your lifetime.
  

Remainder of trust to charity after pet dies. A trust should say where assets go after the pet dies. The Internal Revenue Service ruled on a trust in a will whereby funds would later go to a charity. The trustee would use the assets caring for the pet. Does the estate get a charitable deduction? The agency explained that though trusts for pets in a state where the owner lives are valid, no one has the authority to enforce its terms. A pet obviously cannot compel the trustee to carry out the owner's wishes. This means the trustee may choose either to continue the trust for the pet, as a matter of conscience, or distribute assets immediately to the charity. Thus, when and how much money would go to the charity are indefinite. Because of the indefiniteness, the IRS refused the deduction.

Oddly, in states where pet trusts are void, the estate gets a deduction. The reason: when and how much money would go to the charity are definite--it gets the assets set out in the will and gets them upon the owner's death.

Honorary trust. Some states allow something new: The trustee is on her honor to follow trust instrument directions. A few of these states now, however, allow appointment of a person to ensure that the trustee follows directions.

More at Planning, Other

THE MORAL: When you go, don't forget Fido.