We are not providing any legal or tax advice. We suggest you seek the guidance of a qualified tax professional in your jurisdiction for your specific circumstances. For general information purposes only, pet trusts may essentially be taxed in three (3) ways:

1. Taxed to the Trustmaker. During the lifetime of the Trustmaker, trust earnings are taxed to the Trustmaker as a Grantor Trust.

2. Taxed to the Beneficiary. For a traditional pet trust where there is a human beneficiary charged with the responsibility of providing care to the pet, all trust distributions of income will be taxed at the pet guardian’s personal income tax rate. As a result, it is important to consider the possible tax ramifications for traditional pet trusts. For statutory pet trusts where the pet is the beneficiary, the IRS has determined that a pet trust is not valid for tax purposes, but notwithstanding, they reserve the right to tax the trust income at trust tax rates.

3. Taxed at trust tax rates. Trust tax rates are the same as individual tax rates but get to the highest rate at lower levels of income. A trust earning income in excess of $12,300 in 2016 may have a tax rate of 39.6%.