A legacy for Lassie: Pet trusts and income taxes
Ever see a millionaire cat? What about a poodle owning a Porsche? Well, that might not be too far off now that all 50 states have “pet trust” laws that let owners provide for the care of their pets, after the owner dies. Minnesota became the final state to pass such legislation in 2016.
But in some states – and social circles – leaving legacies to four-legged friends is nothing new. Among the ranks? The rich and famous, like real estate magnate Leona Helmsley – aka the “Queen of Mean.” She “left $12 million in trust for the care of her beloved Maltese, Trouble,” according to TheBark.com, a website for dog lovers.
But Helmsley wasn’t alone. According to USA TODAY.com:
- “Tobacco heiress Doris Duke left $100,000 to her dog, Rodeo.”
- “Actress Betty White is reported to leave all of her $5 million estate to her pets.”
- British singer Dusty Springfield arranged for her cat, Nicholas, to get “a lifetime supply of his favorite meal, imported baby food.”
First pet trusts, then pet taxes
“Taxpayers often have general conversations with tax professionals about trusts or wills,” says Jackie Perlman, principal tax research analyst at The Tax Institute at H&R Block.
Setting up a trust is a legal process, best performed by an attorney. Now residents of all 50 states have a legal way to provide for their pets after their death, which gives them a formalized and consistent way to treat this type of trust according to their state’s rules. States may have limitations on how much money can be set aside for the care of a pet as well as other restrictions.
“Trusts can have very complex rules, whether they’re for a pet or a more traditional beneficiary. As with any trust, taxpayers should consult a qualified trust attorney to make sure when they’re planning for their pets’ care. Some issues to take into account are: who will care for their pet, how the money will be used, and who will be the trustee of the trust and handle any tax filing requirements” said Perlman.
People who receive bonuses have to pay tax on that income. H&R Block explains how bonuses are taxed.
Prepare to negotiate compensation packages that include stock options, just as some startups do. Wherever you are in your career, H&R Block can help.
Award shows mean free stuff, and lots of it. All these gifts could draw scrutiny from the IRS.
Learn how vacation home rental tax rules could mean a tax-free windfall for Airbnb, Homeaway or VRBO hosts this Fourth of July.