BILL ANALYSIS                                                                                                                                                                                                    






                           SENATE JUDICIARY COMMITTEE
                        Senator Ellen M. Corbett, Chair
                           2007-2008 Regular Session


          SB 685                                                 S
          Senator Yee                                            B
          As Amended January 9, 2008
          Hearing Date: January 15, 2008                         6
          Probate Code                                           8
          GMO:rm                                                 5
                                                                 

                                     SUBJECT
                                         
                                  Pet Trusts 

                                   DESCRIPTION 

          This bill would repeal current law on trusts for  
          domesticated or pet animals and enact new, more detailed  
          provisions for the creation and enforcement of pet trusts.   


                                    BACKGROUND  

          This bill is sponsored by the San Francisco Society for the  
          Prevention of Cruelty to Animals (SFSPCA).

          According to the SFSPCA, it is estimated that "well over  
          half of American households have at least one pet" and that  
          "most pet-owning households believe you should have more  
          than one pet, and 40% of dog-owning households have at  
          least one cat."  The SFSPCA also asserts that increasingly,  
          pet owners are seeking to ensure that their pets are cared  
          for after the owner's death or disability.  Thus, informal  
          arrangements with family or friends have been made for the  
          care of such animals.  Some have ventured to include pets  
          in their wills, while others have created "pet trusts" that  
          set aside money for the care of the pets in the event of  
          the owner's death or disability. 

          For example, famed real estate and hotel mogul Leona  
          Helmsley left a trust of $12 million for the care of her  
          pet dog, Trouble.  Another, lesser known pet owner from  
                                                                 
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          Maryland, willed some $400,000 plus a house to the three  
          stray dogs that he adopted.  Of course, the trustee or  
          executor is expected to pay a caretaker to ensure that the  
          pets are housed, fed, and maintained as provided in the  
          trust or will.
                                         

                            CHANGES TO EXISTING LAW
           
           Existing law  provides that a trust for the care of a  
          designated domestic or pet animal may be performed by the  
          trustee for the life of the animal, whether or not there is  
          a beneficiary who can seek enforcement or termination of  
          the trust and whether or not the terms of the trust  
          contemplate a longer duration. (Probate Code Sec. 15212.)

           This bill  would repeal Probate Code Sec. 15212.  It would  
          instead provide that:
            a.  a trust for the care of a designated domestic or pet  
              animal is valid and terminates when no living animal is  
              covered by the trust;
            b.  the governing instrument shall be liberally construed  
              in order to bring the transfer within the normal rules  
              for trusts, to presume against the honorary nature of  
              the disposition, and to carry out the general intent of  
              the trustor;
            c.  the trust principal or income shall not be converted  
              to the trustee's use or for any purpose other than for  
              the benefit of the covered animal;
            d. upon termination of the trust, the trustee shall  
              transfer the unexpended trust property as specified  
              (see Comment 3);
            e.  the intended purpose of the trust principal or income  
              may be enforced by a person designated by the trust or,  
              if none is designated, by a person appointed by the  
              court upon application;
            f.  except as ordered by the court or as required by the  
              trust instrument, no accounting, filing, separate  
              maintenance of funds, fees, or other report is required  
              by reason of the fiduciary relationship of the trustee;
            g.  if the trust instrument does not name a trustee or no  
              trustee or successor trustee is willing or able to  
              serve, the court would be required to appoint a trustee  
              to carry out the intended use of the trust property;  
              and
                                                                       




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            h. a court may make all other orders necessary to carry  
              out the trustor's intent. 

                                     COMMENT

           1.    Need for the bill

             The author states:

              The changes set out in SB 685 create the basis for  
              oversight and enforcement of pet trusts.  The  
              consequence of this oversight is that the trust  
              provisions would be legally protected.  If it were seen  
              that pets covered by the trust were not being properly  
              cared for, legal action could be taken to ensure that  
              the pets are protected.  Thus, a trustor's plans could  
              be enforced, and pets surviving their owners could not  
              be discarded with impunity, as is the case with present  
              pet trust law.  This could then have positive effects  
              on shelters and animal care facilities, which are all  
              too often the destination and destiny of pets whose  
              owner/guardian has passed away.  

            The author and sponsor believe that current California  
            law treats pet trusts as honorary and therefore these  
            trusts are unenforceable.  The statute (Probate Code Sec.  
            15212) does not contain any references to a pet trust  
            being honorary and there are no cases interpreting the  
            statute that would clarify whether or not it is honorary.  
             Nevertheless, the sponsor of SB 685 asserts that  
            California is one of only two states that have  
            unenforceable pet trust statutes, and that by adopting  
            the pet trust provisions of the Uniform Probate Code  
            (which this bill would do), California will finally join  
            37 other states that provide for the creation of pet  
            trusts and the means for their enforcement.

          2.    Express validation and condition of termination of a  
            pet trust; liberal construction to carry out trustee's  
            intent

             a.   Valid pet trust terminated when no living animal is  
               covered  

               SB 685 would expressly make valid a trust created for  
                                                                       




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               the care of a designated domestic or pet animal,  
               provided it meets several requirements. It would also  
               terminate the trust, automatically, "when no living  
               animal is covered by the trust." (Page 2, line 18 of  
               the bill.)  Under this phrase, a trust could last into  
               perpetuity, if the trust expressly provided for the  
               care and maintenance of a pet animal and his or her  
               progeny.

               In contrast, the condition for termination of the  
               trust would be different if the phrase were "when no  
               animal living when the trust became effective is  
               covered by the trust." Under this phrase, the trust  
               must necessarily designate an animal that was alive at  
               the time the trust became effective, and the trust  
               would terminate when that animal dies.  

               It is not clear which of the two scenarios the author  
               or the sponsor intend with SB 685.  Assuming the  
               choice to use the first phrase was indeed correct, the  
               bill would clearly allow a pet trust to cover the  
               progeny of an animal who was alive at the time the  
               trust was created.

               The use of the first phrase in the bill, rather than  
               the narrower second phrase, seems to allow for a  
               testator or trustor to intentionally and expressly  
               create a pet trust that would last through generations  
               of the designated domestic or pet animal, even into  
               perpetuity.  If so, the testator or trustor should be  
               warned that the rule against perpetuities would make  
               such pet trusts voidable.  

               However, Probate Code Section 15211 limits the  
               duration of trusts for lawful noncharitable purposes  
               to 21 years, whether or not the terms of the trust  
               contemplated a longer duration.  The Legislature  
               enacted the 21-year limit for this type of trust to  
               prevent the trust from becoming voidable because it  
               violates the rule against perpetuities. Thus, even if  
               Lassie's owner wanted Lassie's descendants to be  
               covered by a trust created upon the owner's death, the  
               trustee could only provide care to Lassie and Lassie's  
               descendants for a total of 21 years from the date of  
               owner's death.
                                                                       




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              b.   When animal has a life span longer than 21 years  
                
                Proponents point out that some animals have a life  
               span longer than 21 years.  For these animals,  
               therefore, an exception to Section 15211 may be  
               necessary to prevent the trust from terminating  
               automatically at the end of 21 years, and leaving the  
               animal without care thereafter.  Perhaps the author  
               can add language to extend the duration of the trust  
               until the death of those animals alive and covered by  
               the trust when the 21 year point is reached (assuming  
               the trustor's or testator's intent to cover Lassie's  
               progeny is clearly expressed in the trust instrument).

                Suggested language:   If the author wishes to cover  
               these animals with a life span of 21 years or longer,  
               the following language is suggested:

               (c)  Notwithstanding section 15211, a trust for the  
               care of a covered domestic or pet animal that has a  
               life span of 21 years or greater shall terminate when  
               that designated animal dies.

              c.   Pet trust not merely a precatory or honorary  
               disposition 
                
                The bill also contains language directing that the  
               governing instrument of the animal trust be liberally  
               construed to ensure it is validated as an enforceable  
               trust (i.e., that it is not merely a precatory or  
               honorary disposition of property) and to carry out the  
               general intent of the trustor (the pet owner who  
               created the trust and is deceased).

              d.   Suggested amendments  
             
                To make the proposed Section 15212 consistent with the  
               terminology of trusts, the following amendments should  
               be made:

               On page 3, line 2, strike out "transfer" and  
               insert:trust
               On page 3, line 4, strike out "transferor" and  
               insert:trustor
                                                                       




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               On page 3, line 5, strike out "transferor's" and  
               insert:                                            
               trustor's
               On page 3, line 16, strike out both "transferor's" and  
               insert:                                            
               trustor's
               On page 3, line 17, strike out "transferor's" and  
               insert:                                            
               trustor's
               On page 3, line 19, strike out "transferor's" and  
               insert:                                            
               trustor's
               On page 3, line 39, strike out "transferor" and  
               insert:                                      trustor

               To ensure that the pet trust is characterized as a  
               trust for a lawful noncharitable purpose, the  
               following amendment is suggested:

               On page 2, line 17, delete "valid" and insert:

               a trust for a lawful noncharitable purpose

          3.    Requirements for a valid and enforceable trust

             The bill specifies several conditions that the trust must  
            meet in order to be valid.

            First, except as the governing instrument itself may  
            provide, a pet trust cannot be converted to the use of  
            the trustee or for any use other than the trust's purpose  
            or for the benefit of a covered animal.

            Because the language of proposed Sec. 15212 does not  
            define what is a "covered animal," it would behoove the  
            person drafting the pet trust to be clear as to which  
            animals, living or to be born, will be covered by the pet  
            trust. (See Comment 2.)

            This provision would ensure that a trustee does not  
            ignore the wishes of the deceased person (pet trustor)  
            for the care of the pet or pets.

            Second, upon termination of the trust (see Comment 2) the  
            trustee must transfer the unexpended trust property  
                                                                       




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            either as directed by the trust or, if the trust was  
            created in a nonresiduary clause of a will, the trustee  
            must transfer the unexpended trust property under the  
            residuary clause of the will.  If the trustee could not  
            transfer unexpended assets as described, the trust  
            property would be distributed to the trustor's heirs as  
            provided in other provisions of the Probate Code (Sec.  
            21114). 

          4.    Other trust provisions

             This bill would provide for the court's appointment of a  
            trustee if the pet trust does not designate a trustee or  
            no designated trustee is willing or able to serve.   The  
            court may require the transfer of property to a trustee,  
            if necessary to carry out the trustor's intended use of  
            the property, as well as make other orders.

            A significant deviation from the treatment of other,  
            similar trusts is that SB 685 would not require the  
            trustee to account for, file periodic accountings,  
            maintain separate funds for the trust, or make reports  
            unless the governing instrument requires it or the court  
            so orders.  Thus, unless Leona Helmsley's pet trust  
            required periodic accounting of the $12 million set aside  
            for the care of her dog Trouble, other beneficiaries of  
            her general trust would have to obtain a court order to  
            monitor the expenditure of the funds by the trustee or  
            the person taking care of Trouble.

            SHOULD THERE BE SOME ACCOUNTING MADE OF THE PET TRUST  
            WHERE THE TRUST ESTATE IS SUBSTANTIAL?  

            The period covered by the accounting may be much longer  
            in duration than that of other trusts, perhaps every four  
            years, and less detailed.

            Finally, under SB 685, the intended use of the trust  
            principal or income may be enforced by a person  
            designated by the trust instrument or, if none is  
            designated, by a person designated by the court upon  
            application by that person. In other words, if Leona  
            Helmsley's trust did not designate her brother as the  
            person to see to it that the $12 million is set aside for  
            her dog Trouble, any other person could petition the  
                                                                       




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            court to be appointed to enforce the intended use of the  
            $12 million.  In other words, a third party could  
            petition the court to be appointed like a "guardian ad  
            litem" for Trouble so that Trouble's interest in the $12  
            million could be protected.

            SHOULD THIS THIRD PARTY HAVE SOME INTEREST OR CONNECTION  
            TO THE ANIMAL IN ORDER TO PETITION FOR DESIGNATION AS  
            ENFORCER OF THE INTENDED USE OF THE TRUST PROPERTY?

            OR COULD THIS "PERSON" BE A NONPROFIT CHARITABLE  
            ORGANIZATION THAT HANDLES ANIMALS?

          6.    Effect of other existing trust provisions

             Because a pet trust created under this bill would still  
            be a trust, it would be subject to all of the Probate  
            Code provisions that generally govern trusts.  Thus, the  
            trust may sue and be sued, buy and sell stocks, and  
            conduct any activity that a trust where the beneficiary  
            is a person may do.

            In fact, Trouble has been sued by a caretaker who claims  
            that he mauled her several times and caused her injury.   
            The question is whether a judgment against Trouble could  
            be paid out of the $12 million trust estate, if that was  
            not an "intended use" of the trust under the governing  
            instrument.

          Support:   WildCare; The Humane Society of the United  
                  States; The Marin Humane Society; The San Francisco  
                  Dog Owners Group (SFDOG)

          Opposition: None Known
                                         

                                    HISTORY
           
          Source: The San Francisco Society for the Prevention of  
          Cruelty to Animals

          Related Pending Legislation: None Known

          Prior Legislation: None Known
          
                                                                       




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