Pet Trusts & the Charitable Remainder Exception

Jonathan Wilkerson (J.D. candidate 2009, Texas Tech) has recently published his article entitled 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).

The following is an excerpt from the introduction of the article:

While most states have done their part through recent state law changes for pet trusts, a real need for change at the federal level exists, particularly to the Internal Revenue Code (IRC), to help American pet owners and to bring about real progress for pet trusts. But Congress has not responded in a meaningful way, and the pet-owner constituency has not enjoyed the federal statutory success it needs.

The pet-owner constituency is too large for Congress to ignore-Americans own approximately eighty-nine million cats and seventy-five million dogs.  Stated another way, 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 as parents. Congress must recognize the importance of 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. House Resolution 2491 (the Morgan Bill), a proposed statutory amendment for pet trusts, would amend the IRC in two ways: (1) the remainder of pet trusts given to non-profit organizations 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. Throughout this Comment, Lindsay’s situation illustrates the application of the current law and how average pet owners, like her, would benefit from the Morgan Bill.

This Comment examines how Congress should amend the charitable remainder exception to pet trusts by passing the Morgan Bill. Part II gives a brief summary of the various types of pet trusts. Parts III and IV explore the current federal tax laws. Part V then explains the current law regarding the charitable remainder exception, and Part VI considers the Morgan Bill and strategies for pet owners until the IRC is amended. Ultimately, this Comment proposes that Congress provide a limited exception for pet trusts by enacting the Morgan Bill.