Pet owners in Florida sometimes ask about pet planning, life insurance, and how they can use their life insurance policies to protect their pets. While it is possible to use life insurance as a way to look after your pets needs after you are gone, it is not as simple as listing your pet as the policy beneficiary. There are several steps you will have to take in order to ensure that your life insurance policy benefit will be put towards caring for your animal after you are gone. Let’s take a look at how this process works.
Life Insurance Policies
Most people are familiar with how life insurance works, but let’s run down the basics anyway. First, when people sign up for a life insurance policy, they agree to pay a regular premium in exchange for a specified payout. Once the policyholder dies, the insurance company pays the policy payout to a specified beneficiary. The policyholder can choose who they want that beneficiary to be, and can change the beneficiary whenever they like. As long as the policyholder chooses a beneficiary in accordance with the life insurance policy terms, the policyholder can choose whomever they wish.
Property and Pets
The law considers pets and other animals to be property. Pets, therefore, cannot legally own property by themselves. You cannot, for example, leave your pets an inheritance through your last will and testament, or name your pet as the co-owner of your home.
If you choose to list your pet as your beneficiary on your life insurance policy, this can cause significant problems. What you can do, however, is use an intermediary to own property on behalf of your pet and name that intermediary as the life insurance beneficiary. You do this by creating a pet trust.
A pet trust is a legal entity that can legally own and inherit property. When you create a pet trust you either set-aside property so that the pet’s needs will be cared for after you are gone, or you provide for the trust to receive such property upon your death. When you create the trust you will choose a trustee who will manage the trust property, as well as a caregiver who will physically care for the pet. It is the trustee’s responsibility to make sure that the pet trust property is used to only care for the pet, while the caregiver will be the person with whom the pet actually lives.
So, once you create a pet trust, you can use your life insurance policy as a way to fund the trust and provide for your pet. You can list the trust as the life insurance policy beneficiary because the trust is legally entitled to own or inherit property.
If you’d like to discuss setting up a pet trust and using a life insurance policy to fund it, contact our office so we can talk about the details.