3 Brilliant Ways To Use Your Life Insurance to Protect Your Pets
Your pets are members of your family, and they provide you with companionship, joy and in some cases, the sort of services you just can’t find anywhere else. So is it possible to make sure they’re taken care with your insurance?
The simple answer is that, yes, you can, but it will require some planning on your part.
Even if you’re on a tight budget, you can make certain that your life insurance will be available to care for your pets. While the process isn’t entirely straightforward, there are ways to make sure they’ll be taken care of tough pets are legally considered “property.”
“The reasons a pet cannot be the sole beneficiary of a life insurance policy are basically because it would be very difficult to verify the pet’s identity. Not to mention, a pet can’t sign off on any legal documents,” says Holly Anderson, spokesperson for State Farm Insurance.
While there may not be agencies that provide life insurance for pets, there are plenty which provide pet health insurance, among them, the American Society for Prevention of Cruelty to Animals.
You can actually use your own life insurance policy to make sure your pet is pampered for the rest of its life. To make it happen, one simple way is to establish what’s known as a “living trust” to accommodate your pet’s future needs. You can use such a trust to specify that proceeds of the trust to go to cover expenses which might range from regular veterinary checkups to the finest chew toys to funeral services and expenses.
“Lots of people have different options as to where they put their funds,” says Tricia Clements, legal assistant at Lane & Karlo, LLP, a law firm specializing in estate planning. Clements’ firm has recently begun to offer “pet trusts.”
While she says such trusts are feasible, there are some drawbacks.
As most trusts function by having a trustee appointed to manage and allocate the funds to their designated recipients, for a pet trust, a trustee is appointed as a caregiver for the animal. This arrangement creates a system of checks and balances to make sure your pet is cared for properly.
“There are numerous options to fund a pet trust. For example, somebody may have a life insurance policy and name the [pet] trust a partial or sole beneficiary,” Clements says.
She added that an alternative way to use your life insurance to care for your pets is to name the caregiver or trustee the sole beneficiary of your life insurance policy. It’s also possible to make the policy a “conditional gift” or to specify how the proceeds of your policy and funds are to be used via your will.
“A [pet] trust has a trustee who manages the money and pays the caretaker. It is best to have the trustee and caretaker separate so there’s a system of checks and balances. The problem with making a life insurance policy conditional gift is that it cannot be enforced, so you need to be very comfortable with the person you leave this money to—you are basically giving them the money with no guarantee,” Clements said.