June 28, 2001 | Read Time: 3 minutes
By J.J. MACNAB
Talk about a pet project: U.S. Representative Earl Blumenauer, an Oregon Democrat, has introduced a bill that would allow donors to set up planned-giving arrangements that benefit their dogs, cats, and other furry friends.
So-called Charitable Remainder Pet Trusts would resemble standard charitable remainder trusts, which make regular payments to donors during life, with the amount of the payments based on the donors’ expected life span. When the donors die, any remaining trust assets go to charity.
With a pet trust, the payments could be based not on the length of a donor’s life but on the length of a pet’s life. A donor could use the trust payments to care for a pet — or for any other purpose, for that matter. Or the trust could be set up so that it started making payments after the donor’s death, so that others could use the money to take care of the critter for as long as it lived.
On the surface, Representative Blumenauer’s bill seems as harmless as a toy poodle. Its intent, of course, is to ensure that pets are well taken care of long after their masters are gone.
But the bill is as dangerous as it is silly. It is an open invitation for those who abuse charities to make a fortune on its weaknesses. What’s more, it makes a mockery of more important issues on which Congress needs to be spending its time and attention.
The bill exists because pet-trust advocates, including the Oregon Humane Society, have had a difficult time getting states to accept and enforce pet-trust arrangements. They thus are trying to slip them into the federal code by covering them with a protective shield of a legitimately popular techniquethe charitable remainder trust.
But if they were to succeed, they would invite the kind of abuses that the nonprofit world has fought long and hard to eliminate.
Consider, for example, that the longer a pet lived, the more money would be paid to a beneficiary and the less to charity. Because payments from a charitable trust are based on life expectancy, pet trusts could be abused by manipulating the “lifetime” of the animal that the trust purportedly benefits. Think of the potential for “pet-replacement” fraud: “Little Jimmy, the bad news is that Scruffy got hit by a car this morning. The good news is that we’re going to get a dog that looks exactly like Scruffy before our upcoming audit.” How would an Internal Revenue Service agent know one Yorkshire terrier from another?
The bill, HR 1796, also would force the I.R.S. to come up with reliable statistics on how long numerous breeds and species of animals were expected to live. After all, the income- and estate-tax deductions for charitable trusts are based on particular life expectancies. Mortality figures for people are hard enough to develop. But for animals? The life expectancy of a mouse is substantially different from that of a Chihuahua, Great Dane, pot-bellied pig, or tortoise.
Besides, how would one determine the age of a pet that had been found or adopted?
And one more question for those who love pets — and pet trusts: Under Representative Blumenauer’s proposal, wouldn’t a monetary incentive exist to keep an animal alive well beyond the point when most of us would have shown more compassion?
Not only is the bill flawed, but so is the nonprofit world’s reaction to those who oppose it. They are assumed to be animal haters or, at best, ambivalent to the cats, dogs, boa constrictors, and parakeets of the world. Yes, taking care of pets is a very serious concern for many, many people, myself included. But do pet lovers really need tax incentives to make financial arrangements for their loved ones?
Sorry, this legislation is for the dogs.
J.J. MacNab is a Bethesda, Md., consultant who specializes in planned giving, tax planning, and fee-based insurance analysis. Her e-mail address is jj@deathandtaxes.com.
