Paul L. Caron

Wednesday, May 20, 2009

Beyer & Wilkerson: The Tax Treatment of Pet Trusts

Gerry W. Beyer (Texas Tech) & Jonathan P. Wilkerson (J.D. 2009, Texas Tech) have published Max's Taxes: A Tax-Based Analysis of Pet Trusts, 43 U. Rich. L. Rev. 1219 (2009).  Here is the abstract:

Humans and charities are no longer the primary entities many individuals wish to benefit upon death. Instead, there is a growing interest in providing for Rover, Fluffy, and Polly, that is, our beloved pets. There has been a recent surge of public interest in pet planning as high-profile individuals have died with significant provisions in their wills or trusts for the benefit of their animals.

This increase in the special estate planning needs of pet owners is reflected by legal scholarship, continuing legal education programs, and legislative action in the pet trust arena. But little time has been devoted to the tax ramifications of pet trusts although a brief discussions are included in several articles. The purpose of this article is to fill this gap and give practitioners guidance how pet trusts are treated for tax purposes and to suggest to Congress how the Internal Revenue Code should be amended to clarify taxation issues.

See also Jonathan P. Wilkerson, Comment, A "Purr"fect Amendment: Why Congress Should Amend the Internal Revenue Code to Apply the Charitable Remainder Exception to Pet Trusts, 41 Tex. Tech. L. Rev. 587 (2009):

This Comment advocates for changes in how the charitable remainder of a pet trust operates. In America, creation of pet trusts continues to rise as aging baby boomers care for what are, in some cases, their most beloved 'children' as most pet owners view their pets as family members. States have responded to this rising demand for estate planning techniques and complexities with statutory changes addressing the pet trust issues. While most states have done their part through recent state law changes for pets, a real need for change at the federal level exists, particularly to the Internal Revenue Code, to help American pet owners and to bring about real progress for pet trusts. The pet-owner constituency is too large for Congress to ignore-more Americans are pet owners than parents. Parents can provide a trust for their children and allow the remainder to pass on to recognized charities with the trust enjoying many tax benefits, but pet owners do not enjoy the same testamentary rights and tax benefits under the current tax code. Congress should get serious about pet trusts and amend the IRC to allow the charitable remainder of a pet trust to enjoy the same tax-free benefits as a non-pet trust by passing House Resolution 2491 (Morgan Bill) -- a proposed statutory amendment for pet trusts-which would amend the IRC in two ways: (1) the remainder of pet trusts given to non-profits and charities would not incur estate or gift taxes, and (2) the income earned by the pet trust would be deductible from the trust's income tax. Ultimately, this Comment proposes that Congress provide a limited exception for pet trusts by enacting the Morgan Bill

Scholarship, Tax | Permalink

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