Using Your IRA to Take Care of Your Pet After You Die

By Joe Cicchinelli, IRA Technical Expert

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The law allows you to leave money and property to a beneficiary after your death. Generally, the beneficiary must be a person or legal entity capable of accepting the property.

Individuals almost always name a beneficiary of their IRA who will inherit the funds after their death. Usually the IRA beneficiary is a person such as a spouse, child, or grandchild. But IRA owners can name a legal entity as their IRA beneficiary, such as a charity, estate, or trust.

If you are an IRA owner and have a pet and would like to have that pet taken care of, you cannot leave the pet your IRA directly because a pet is incapable of accepting the property. However, there are ways to make sure that your favorite pet is taken care after you die without leaving the pet any funds directly.

One way is to leave the IRA funds to your estate and then have language in your will that says the pet must be taken care of after your death. However, this approach has many pitfalls such as ensuring that the funds actually are used for your pet’s care. A better way might be to name a special trust known as a pet trust as the IRA beneficiary.

A pet trust is a trust governed by state law that holds cash or other property “in trust” for the benefit and care of your pet. Typically, the trust will remain open for the life of the pet, and the trustee of the trust ensures that the money is used for the pet’s care. An attorney knowledgeable in pet trusts should be consulted before naming a pet trust as the beneficiary of your IRA.

The biggest drawback to leaving your IRA assets to your pet, either through your will or through a trust, is that the IRA funds will be subject to accelerated taxation. It is also likely that they will be taxed at the highest income tax rates. It might be advisable to leave other assets to care for your pet whenever possible.