Wednesday, April 8, 2009
ESTATE PLANNING FOR ANIMAL PEOPLE
Making Bequests to Animal Charities, and Setting up Trusts to Benefit Animals
Josephine Usag loved animals all her life. At age 84, having no surviving members of her immediate family, she left equal shares of an estate of $173,000 to four different animal protection groups: the Medina County Animal Shelter and the Medina County SPCA (both in Ohio), and two national organizations--People for the Ethical Treatment of Animals and the National Wildlife Federation.
Each received $29,678, and each was properly grateful. The Medina County Animal Shelter and the Medina County SPCA were particularly grateful, because local animal shelters are perennially under-funded, heavily dependent upon volunteer help, and in urgent need of all sorts of things that only money can provide. They usually are bypassed by people drafting wills--and people making routine donations--because they aren't as big and visible as the national advocacy groups whose appeals continually stuff your mailbox.
But whatever Ms. Usag intended her money to do, chances are at least one share of it canceled out the work done with one of the others. PETA and the National Wildlife Federation have strongly opposing philosophies of animal protection. Since both are primarily advocacy groups, they frequently wind up lobbying and petitioning on opposite sides of issues. Most fundamentally, PETA is opposed to hunting; the National Wildlife Federation originated as an umbrella group for 48 state hunting clubs and is still the leading organized voice of the "hunter/conservationist" philosophy in the United States (the World Wildlife Fund is the global leader). The two organizations agree on some essentials, for instance the need for endangered species protection, but strenuously disagree on how to go about providing it. PETA argues that endangered species habitat should be left undisturbed; the National Wildlife Federation argues that allowing hunting in wildlife protection areas is the most appropriate means of managing and financing habitat protection.
Willing money to advocacy groups with conflicting agendas is only one of the many ways you can waste your estate if you don't carefully research your prospective beneficiaries, and then make sure your will insures that the money goes where it is supposed to go. In one famous Illinois case, an heiress intended to leave her entire multi-million-dollar estate to a trust fund that was supposed to dispense the money to various animal protection groups in support of specific projects. Unfortunately, the attorney who drafted her will was inexperienced and included "boilerplate" language in it, copied from the state charities act, which ended up directing that the funds could go to any charity that engaged in any sort of activity to benefit animals, education, or human health. The will was challenged in court by some of the intended beneficiaries, but the challenges failed because the heiress was no longer around to testify as to precisely what she meant. In the absence of clear testimony to the contrary, the language of her will stood, even though she had never demonstrated any personal interest in any of the other philanthropic projects her estate now supports.
As the above example illustrates, if your intention is to set up a foundation or trust to benefit animals, it is crucially important that you hire an attorney who specializes in trusts and estates.
There are other problems with creating trusts. For example, can you designate trustees with the assurance that they will survive your own death? Someone you don't know (perhaps the courts) may end up appointing trustees. You may be able to define criteria for the kind of trustees you want, but the likelihood that they will hold the interest of animals first and foremost is probably 50/50. At most you may be able to ensure that trustees have no personal conflict of interest with their fiduciary responsibilities.
Many charities have set up plans called "charitable gift annuities," "life income funds," "unitrusts," or "pooled income funds," where in exchange for your contribution of cash, stock, or other property, you are promised a lifetime of fixed payments. Upon your death (or the death of your spouse or other named beneficiary), the contribution you have made belongs entirely to the charity. These plans are generally considered safe investments, but they are irrevocable. Once you put your money into one of these plans, you will not be able to get it out if your opinion of the charity changes in the years to come.
We know of people who have put money into joint charitable trusts, also called "donor advised funds" or "community trusts." Contributions to these are also irrevocable, and there is no guarantee that their money will be spent as they wish. In fact, we've seen one such charitable trust refuse the explicit instructions of the donor.
Choosing an executor for your estate is fraught with risk unless you are a hundred percent certain that person shares your commitment to animals--or, at the very least, is not personally interested in the gift and is without any actual or potential conflict of interest.
Even allowing your chosen executor to choose an animal charity to receive your estate is potentially problematic. All that a self-interested executor need do to hijack such an estate is to incorporate a new animal group and pay him- or herself the money as salary to direct it. This has happened more than once. There are no substantive legal controls on misuse of funds by charities.
Many people in the field of animal protection now will be dead or retired in 20 years. Groups that seem full of vitality now may have fallen into decline. The most urgent problems faced by animals will have changed--at least we must hope so.
Because situations will change, be careful not to be overly specific in directing how a charity may spend your money. Many donors who have contacted us for advice wish to have their estates used for spaying or neutering dogs and cats. However, by the time they are likely to pass on, safe and effective immunocontraceptives and/or chemosterilants will probably be used for homeless and unadoptable populations of cats and dogs instead of surgical sterilizations. These techniques should be fully developed and on the market by 2010. When they are available, dog and cat population control will be revolutionized. With any luck at all, within 15 years there won't be dog and cat overpopulation as we know it now. If dogs and cats are your special interest, we recommend that you prepare a will bequeathing your estate, or whatever portion of it you wish, to the animal protection charity you designate, not for spaying and neutering but "to be used for the purpose of eliminating dog and cat overpopulation and homelessness."
More common than legal errors are problems that result from unfamiliarity with the beneficiaries. We were once asked to help locate an animal rescue group that was supposed to receive a Vancouver woman's estate. It turned out that the "animal rescue group" was in fact a single individual, who was incorporated as a nonprofit organization and did charitable work, but who had made no provision for the continuance of the organization after her own death--and she died nearly a decade before the woman who left her the money. The woman who left the money also failed to indicate in her will a second choice, in case the first beneficiary was no longer around. When you name a charity as a beneficiary in your will, notify the charity, so that they may keep you and your executor informed in case their charitable status changes, or in case they relocate or rename the charity. Also be sure to notify a charity if you have named it as beneficiary to a life insurance policy.
Be sure to use the official, legal name of the charity in your will. There was a case involving a California man who left a multi-million-dollar estate to "The SPCA." Which SPCA, where? More than 1,500 organizations in the U.S. include the words "society for the prevention of cruelty to animals" in their titles, and more than 4,000 perform the generally recognized functions of SPCAs. A probate judge eventually divided the estate in equal shares among all the SPCAs who applied for some of it.
Most common of all are cases of leaving money to organizations that spend more on fundraising and related publicity than on actual animal protection. ANIMAL PEOPLE compiles annual reports on the income, assets, expenditures, and top salaries paid by the 150-odd most prominent national, international, and regional groups involved in animal and habitat protection. Our information comes from the organizations' own IRS Form 990 filings and balance sheets. Since fiscal year 1989, we have discovered that year in and year out, approximately one organization in four is spending more money on fundraising and administration than the 35% recommended ceiling set by the Wise Giving Alliance, a body formed by merger of the National Charities Information Bureau with the Philanthropic Advisory Service of the Council of Better Business Bureaus.
If you want to be absolutely certain that your money is used properly, you will have to distribute it yourself, to organizations in which you have total confidence. Unless death is imminent, naming a charity to receive a bequest many years hence is a crap shoot insofar as insuring administrative integrity and honesty is concerned.
If the bulk of your assets cannot be distributed until after your death, take steps to prepare an ironclad will declaring that the money will go to animal charities named in a codicil to your Last Will and Testament. Your attorney (or you) can easily prepare a new codicil to your will with exact instructions about the charities you are naming every year, with minimal effort and expense. This way you can review and change your charity choice as often as you feel the need. If a group disbands or loses its purpose, choose another. Purge any group that has become dysfunctional or corrupted, and in its place add a deserving new group you have learned about.
In planning the distribution of their estates, some donors shy away from the smaller, poorer, unestablished animal charities in favor of the ones that are securely institutionalized. But while it is true that small groups may disband once their leader dies, it is also true that large, wealthy, and well established charities may lose their purpose once their founders die. Think about the possibility that you might end up bequeathing your estate to a charity that will simply use it to increase the value of its stock portfolio.
(You may help continue the work of ANIMAL PEOPLE by bequeathing a gift of money, securities, or other property to "Animal People, Inc., a 501(c)(3) charitable organization located in Clinton, Washington.")
Providing for Companion Animals in your Will
What becomes of your companion animals if something happens to you?
Providing long-term care for animals left behind is one of the most neglected areas of estate planning, perhaps because most people mistakenly think finding new homes for their wonderful dogs, cats, birds, horses, or other animals will be easy. The animals one leaves behind may indeed be wonderful, but animal shelters are unfortunately full of wonderful animals. Currently, 4.4 million dogs and cats are killed in shelters each year because there are not enough adoptive homes for them all--and the older the dog or cat is, the less likelihood there is that the animal will be adopted. Because most pounds and shelters are desperately short of space, many kill the majority of animals over three years old upon arrival.
If you want your companion animals to go on living a happy, healthy life after your departure, make sure the animals are remembered in your will. The history of attempts to look after animals properly through wills and bequests indicates that you will definitely need the help of an experienced estate lawyer. Other beneficiaries frequently challenge bequests made on behalf of animals - usually winning. Because animals do not have legal standing, courts have repeatedly overturned wills that leave money or property directly to them. Likewise, courts have overturned hundreds of wills that leave money or property to other people on condition that they look after certain animals. Such "gifts on condition" do not have the same binding strength as specific contractual agreements, under which both parties agree to what is to be done, in exchange for what considerations.
There are three legal avenues you may take to provide for your animals.
First, you may establish a trust fund for that purpose. The conditions of the trust must explain what is to be done with the remainder of the fund after the demise of the animals. Avoid "over-funding," which some courts have cited as a reason to overturn trust funds. A trust fund that can pay out the cost of boarding an animal at a good kennel for the maximum expected life of the animal will probably be considered appropriate; a larger fund may run into trouble.
If setting up your own trust fund is impractical, you may enter into a direct contractual relationship with someone to take care of your animals, effective upon your death or incapacitation, designating your estate executor as agent for your end of the contract.
You can also leave a bequest to an existing charitable organization such as a humane society, which agrees to look after your animals - but make sure you have the agreement finalized, in writing, before putting it into your will.
Of course it is possible that your surviving friends and family are prepared to take in your companion animals, if necessary. But be aware that the cost of maintaining each animal can be considerable: $500 to $3,000 a year for dogs and cats, depending on the age, health, and needs of the animal. Ask before making assumptions, and be sure the arrangements you make in your will are appropriate. Too often we hear about cases like one in California, where a woman who died without assets left 35 dogs to dear friends, all of whom were on fixed incomes. Nine of the dogs did find new homes, but 24 were killed by animal control due to lack of adoption opportunities.
Companion Animals in Nursing Homes
Nothing about entering a nursing home is likely to be easy. The expense, the loss of privacy, and the loss of familiar surroundings are well-recognized blows to the patient's sense of self. But an even harder blow to many is having to give up cherished animal companions. In most states, nursing homes don't even have the option to allow residents to keep dogs and cats. The only exceptions are made for seeing-eye dogs and hearing dogs. Various attempts have been made by state legislatures to allow ambulatory patients to have animals if they're able to look after them, but so far all such efforts have failed in committee.
The problem, explains Samantha Mullen of the Humane Society of the U.S., is that the presence of dogs and cats could greatly complicate keeping nursing homes clean. Further, once dogs and cats are admitted, administrators anticipate great difficulty in persuading people to part with the animals when their health deteriorates to the point where they can no longer care for the animals themselves. It is easier to simply keep animals out altogether.
Animals are allowed in nursing homes in a few states, but only under tight restriction. Most nursing homes that accept animals will permit only small caged birds or a small tank of tropical fish. A few will accept neutered cats. Ambulatory patients do often keep animals, but strictly on the sly. The ANIMAL PEOPLE staff once helped a nursing home janitor to capture and arrange for neutering all the cats on the premises. We thought there might be 20 when we started. There were 32, plus an assortment of opossums and raccoons who had also become used to daily handouts. And we didn't even try to count the birds who feasted on crumbs placed along window ledges.
The Animal Welfare League of Greater Baltimore in the early 1990s formed a subsidiary corporation called Pets and People Care Systems, to manage a series of facilities designed specifically to accommodate ambulatory patients and up to three animals apiece. The program is funded through a bequest from the late Tom Heghinian, who reluctantly gave up his dogs Muttski and Halley when he was hospitalized with terminal cancer. The first Pets and People Care home, the Heghinian Center, occupies a large brownstone house in Baltimore. The initial three human residents were chosen from a list of 20 applicants, which subsequently grew to hundreds of names. The humans share the facility with a full-time manager/caretaker.
Humane organizations in several other states have researched the possibility of setting up similar programs, and many have programs that involve taking dogs and cats to nursing homes as visitors, but the opportunity to keep an animal as a nursing home resident is still extremely rare.
ANIMAL PEOPLE is the only independent newspaper covering animal protection worldwide. We produce 10 regular editions per year, emphasizing original investigative reporting on topics of humane concern, researched and written by professional staff whose backgrounds average more than 25 years apiece of experience in both news work and animal protection. In addition to providing news reportage, we offer a lively forum for discussion and debate about ideas and tactics, via letters, guest columns, and point/counterpoint face-offs. Early-age neutering, neuter/return feral cat control, high-volume adoption, care-for-life of exotic and dangerous animals, and conversion of shelters to no-kill policies all began on a limited local scale here and there before ANIMAL PEOPLE debuted in 1992, but each exploded in popularity and prominence soon after we devoted significant page space to discussion of successful projects and debate over their pros and cons. More recently, we are seeing a surge of interest in outreach to poor, rural, and foreign animal protection projects, also following considerable attention to such outreach from ANIMAL PEOPLE. Subscriptions to ANIMAL PEOPLE are sold for $24.00 each, but are sent free to more than 9,500 animal charities and agencies throughout the world. ANIMAL PEOPLE also provides accountability monitoring, to assure donors that animal protection organizations are delivering the services they promise to provide when they solicit funds. This is accomplished via "The Watchdog," a regular investigative feature of ANIMAL PEOPLE, supplemented by two annual special reports. "Who Gets The Money?" is included each year in the November or December editions. It includes the most prominent animal protection organizations' budgets, assets, program-versus-overhead balance both as declared by the various charities to the IRS and as recalculated using the National Charities Information Bureau accounting standard, and top salaries paid. There are also extensive explanatory footnotes. The ANIMAL PEOPLE Watchdog Report on Animal Protection Charities, a stand-alone publication sold separately for $20, provides further information pertaining to the 100+ organizations we are most often asked about. It summarizes their major programs along with any program-related controversies, administrative issues, and/or policy-related issues involving them.