Q

Can you name your pet as your life insurance beneficiary?

A

You can’t list your pet as the recipient of the life insurance death benefit, but there are other ways to ensure they are cared for if you die.

Nupur Gambhir

Nupur Gambhir

Published April 13, 2020

KEY TAKEAWAYS

  • You can’t list your pet as a life insurance beneficiary, but you can list a caretaker or guardian of your pet as the beneficiary

  • A pet trust that your life insurance policy pays into would ensure that the funds you’ve left behind for your pet are used according to your wishes

  • It’s important to leave behind a detailed plan about how you would like your pet to be taken care of and what expenses the life insurance funds are going towards

The life insurance death benefit is an income replacement for your loved ones when you die. People usually designate their life insurance death benefit for their human dependents, like their children or spouse. But what if you want to ensure the safety and protection of your furry children?

You technically can’t name your pet as your life insurance beneficiary — the recipient of the death benefit will need a bank account to file a death benefit claim, which your pet doesn’t have. But there are steps you can take through your life insurance policy to make sure that your favorite non-humans are protected if you die.

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Do you need financial protection for your pets?

When you add together food, veterinary bills, and other miscellaneous expenses, having a pet can get pretty expensive. Large dogs can cost upwards of $2,000 a year, while smaller pets like a rabbit might be less costly and cost under $1,000 annually. Over the course of a pet’s lifetime, they can cost tens of thousands of dollars, not including emergency expenses.

Do you need financial assistance in place for your pet if you die unexpectedly? Well, if you want to ensure your furry friend’s health and safety when you’re no longer around, you might. And if the cost of your pet’s care is going to fall on the shoulders of your loved ones, then you want to make certain that they won’t be burdened or even unable to keep up with the expenses.

Naming your pet as your life insurance beneficiary

The life insurance death benefit is paid out to the policy’s beneficiary — which you determine when you sign your policy’s papers (but can update at a later time). Because your pet can’t partake in the necessary processes that are required to accept the death benefit — such as opening a bank account, signing legal documents, or filing a death benefit claim — you won’t be able to list them as the recipient of the life insurance death benefit. Basically, your policy’s beneficiary needs to be a human or a trust managed by a human. But you can list someone to whom you plan on assigning guardianship of your pet as your policy’s beneficiary.

Naming a caretaker as the life insurance beneficiary

The person on whom you plan to bestow responsibility for your pet can receive the death benefit on the animal’s behalf. Likely, your pet’s caretaker would need funds for food, medicine, veterinary care, and more. You can leave behind instructions for how much of the death benefit you’d like to go towards these expenses — if not all — and how you’d the funds to be allocated.

But what about your other dependents? You might want to cover the expenses of your child’s college tuition alongside your pup’s vet bills. You can name more than one beneficiary and also designate what percent of the death benefit they’ll get in your policy. So if you want to set aside 70% of the death benefit for your spouse and children and 30% of the death benefit for the caretaker of your pets, then you can spell this out in your policy so that the money is paid out per your wishes.

It’s important to be absolutely clear about how you’d like the death benefit to be split up in your life insurance policy, otherwise the death benefit will be split evenly amongst your beneficiaries.

Your beneficiaries will likely receive the death benefit as a tax-free lump sum, which they can use according to their needs. If you have clear instructions as to how the death benefit should be used to care for your pet, make sure to spell that out for the caregiver.

Setting up a life insurance trust

With a lump sum death benefit payout, there’s minimal oversight of how the money is spent after it’s dispersed. Another option to set aside some money for your pets and to ensure they actually get it is to set up a trust that the life insurance death benefit pays into. A trust is a legally binding financial plan for what happens with your money after you die. Like a last will and testament, you can designate how and for what the money can be used.

There are two types of trusts you can choose from:

Setting up a life insurance trust requires a bit of planning. You can’t use your policy to create a new trust, but you can set up a trust before you purchase your policy, and then list the trust as the policy’s beneficiary. When you’re setting up the trust, you’ll also want to designate a trustee to oversee that the dispersed money is spent according to your wishes. Trusts have the added benefit of financial and legal oversight to ensure that the funds are being spent according to your designations.

Pet trusts

Trusts for your human dependents and non-human dependents can be kept separate by making use of a revocable or irrevocable pet trust, which designates money specifically for the care of your animal. Similarly to a straightforward death benefit pay out, you could assign both trusts as the beneficiary and list what percent of the death benefit should go to each trust. Because your pet won’t be able to accept and use the money themselves, you’ll once again need to establish a caretaker for them.

Every state and the District of Columbia have laws in place regarding pet trusts. Here is how long a pet trust lasts in every state:

STATEPET TRUST LAW
AlabamaTrust terminates when pet dies
AlaskaTrust terminates when pet dies or if 21 years have passed, whichever occurs first
ArizonaTrust terminates when pet dies
ArkansasTrust terminates when pet dies
CaliforniaTrust terminates when pet dies unless otherwise specified in the trust
ColoradoTrust terminates when pet dies unless otherwise specified in the trust
ConnecticutTrust terminates when pet dies. A guardian for the pet, or "trust protector", must be assigned in the trust
DelawareTrust terminates when pet dies
District of ColumbiaTrust terminates when pet dies
FloridaTrust terminates when pet dies
GeorgiaTrust terminates when pet dies
HawaiiTrust terminates when pet dies
IdahoA trust for a pet can be created under a "purpose trust", which is a trust that is established when there is no beneficiary
IllinoisTrust terminates when pet dies
IndianaTrust terminates when pet dies
IowaTrust terminates when pet dies
KansasTrust terminates when pet dies
KentuckyTrust terminates when pet dies
LouisianaTrust terminates when pet dies
MaineTrust terminates when pet dies
MarylandTrust terminates when pet dies
MassachusettsTrust terminates when pet dies unless otherwise specified in the trust
MichiganTrust terminates when pet dies or if 21 years have passed, whichever occurs first
MinnesotaTrust terminates when pet dies or if 90 years have passed, whichever occurs first
MississippiTrust terminates when pet dies
MissouriTrust terminates when pet dies
MontanaTrust terminates when pet dies or if 21 years have passed, whichever occurs first
NebraskaTrust terminates when pet dies
NevadaTrust terminates when pet dies
New HampshireTrust terminates when pet dies
New JerseyTrust terminates when pet dies or if 21 years have passed, whichever occurs first
New MexicoTrust terminates when pet dies
New YorkTrust terminates when pet dies
North CarolinaTrust terminates when pet dies
North DakotaTrust terminates when pet dies
OhioTrust terminates when pet dies
OklahomaTrust terminates when pet dies
OregonTrust terminates when pet dies
PennsylvaniaTrust terminates when pet dies
Rhode IslandTrust terminates when pet dies
South CarolinaTrust terminates when pet dies
South DakotaTrust terminates when pet dies
TennesseeTrust terminates when pet dies or if 90 years have passed, whichever occurs first
TexasTrust terminates when pet dies
UtahTrust terminates when pet dies
VermontTrust terminates when pet dies
VirginiaTrust terminates when pet dies
WashingtonTrust terminates when pet dies or if 150 years have passed, whichever occurs first
West VirginiaTrust terminates when pet dies
WisconsinAn "honorary trust" can be established if there is no human beneficiary
WyomingTrust terminates when pet dies

If you have multiple pets listed under your pet trust, then the trust will terminate once the last remaining pet dies.

You should work with an attorney experienced in pet trust laws when setting up a trust for your pet to ensure that your furry friend is well taken care of.

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Nominating a guardian

Whether you are ensuring your pet’s well being through a life insurance trust or the life insurance death benefit, you’ll need to nominate a guardian to accept the funds and take care of your pet. This should obviously be someone you trust — but it’s also important that it’s someone willing to take on the job. Make sure to speak to your pet’s prospective guardian before listing them in your life insurance policy or trust.

And remember, life happens. Your life insurance policy allows you to list a primary beneficiary and a contingent beneficiary, meaning the individual who gets the death benefit if the primary beneficiary is no longer alive to do so. Prepare for the unexpected by listing a backup guardian in your life policy or life insurance trust.

Important steps to ensure your pet’s safety

To ensure the optimal care of your pet after you die, there are a few other clarifications you’ll need to make in your life insurance policy or trust:

  • Any identifying methods for your pet, such as a microchip. This helps prevent fraud
  • Typical care provided to your pet
  • Inspection protocols for your trustee to ensure your pet’s guardian is using funds in accordance with your wishes
  • Lay out how much of the funds go toward each expense
  • Lay out how the caregiver should receive the funds
  • What should happen with the remaining funds once the pet dies
  • Burial plans for your pet

While these plans can be laid out in a trust, you will want to specify your wishes directly to the pet’s assigned guardian if they will receive the funds directly from the life insurance death benefit.

Pet trusts vs. life insurance death benefit

While setting up a pet trust requires a little bit more planning than a simple life insurance death benefit payout, it might be worth the extra work to ensure the proper care of your pet. The life insurance death benefit offers more flexibility in how it can be utilized, while the money from a trust must be used as you specified.

If your pet requires specific veterinary care or a particular type of food, you can be assured that the trust money will go towards that. A trust, whether it's for pets or not, can be a very important part of an estate plan.

Read our guide to estate planning.