Lawletter Vol. 51., No. 4
Matthew McDavitt—Senior Attorney
When money allocated to a pet care trust is found to be excessive because the value of the trust exceeds the amount reasonably required for its intended use, courts in many states possess statutory authority to reduce or redirect the excess.
Except as otherwise provided by the express terms of the trust instrument, any excess trust property determined by a court to exceed the amount needed for the animal's care must be distributed according to specific statutory hierarchies. For example, if the settlor is living, the laws of Connecticut, Texas, Virginia, Florida, Pennsylvania, Arizona, Maryland, and Missouri all dictate that the excess must be distributed to the settlor. See Conn. Gen. Stat. § 45a-489a; Tex. Prop. Code § 112.037; Va. Code Ann. § 64.2-726; Fla. Stat. § 736.0408; 20 Pa. C.S. § 7738; A.R.S. § 14-10408; Md. Est. & Trusts Code Ann. § 14.5-407; and § 456.4-408, R.S.Mo.
However, if the settlor is deceased, those same statutes provide for different treatment of the excess. In Connecticut, excess property is distributed in a strict order of priority: (1) as directed by the trust instrument; (2) to named remainder beneficiaries; (3) to the settlor, if living; (4) pursuant to the residuary clause of the settlor's or testator's will; or (5) to the settlor's or testator's heirs. Conn. Gen. Stat. § 45a-489a. In Texas, the excess is distributed to the beneficiaries under the settlor's will, or, in the absence of an effective will provision, to the settlor's heirs. Tex. Prop. Code § 112.037. In Virginia, the property is distributed pursuant to the residuary clause of the settlor's will (if the pet trust was created in a pre-residuary clause of the will), or pursuant to the residuary provisions of an inter vivos trust (if the pet trust was created in a pre-residuary clause of the trust instrument); otherwise, it is distributed to the settlor's successors in interest. Va. Code Ann. § 64.2-726. In Florida, the excess is distributed as part of the settlor's estate. Fla. Stat. § 736.0408. In Pennsylvania, Arizona, Maryland, and Missouri, the excess is distributed to the settlor's "successors in interest." 20 Pa. C.S. § 7738; A.R.S. § 14-10408; Md. Est. & Trusts Code Ann. § 14.5-407; § 456.4-408, R.S.Mo.
In summary, when the res of a pet care trust is found to be unreasonably excessive, many states authorize courts to evaluate the trust assets and reduce the corpus to an amount reasonably necessary for the animal's care. The excess is then distributed back to (1) the settlor, if living; or to (2) the deceased settlor's designated beneficiaries, estate, heirs, or successors in interest, depending on the terms of the trust and the applicable state statutes.
