would you "Trust" your yacht?

[seattleboatguy]

I'm doing some retirement planning, and my lawyer has suggested setting up a Trust for my Estate. When I mentioned I would be swapping my sailboat for a trawler soon, he suggested letting the Trust be the owner of the boat. Has anyone else done this? Are there implications for things like insurance and leasing a marina slip?

 

[Codger2]

....... he suggested letting the Trust be the owner of the boat.

I just did this about 2 months ago in California and there were no issues with insurance or the marina. In short, you can title the boat any way you desire.

 

[BandB]

No real issues. Only confusion you'll ever face is entry into certain countries. Just be sure all paperwork is on board and it includes documents with the trustee appointing whoever is captaining and granting them authority.

That's really the only issue with the myriad of legal entities that can own boats. If the documentation reads "John Doe" then it's easy for the officials to grasp that's you. If it reads ABC Corporation or ABC LLC or ABC Trust then you need additional documents and you might on very rare occasions encounter someone who doesn't understand what it all means.

 

[windmill29130]

Insurance will be a lot higher for a boat that is documented in a corporation name because it is considered a commercial vessel. I looked into it and my insurance would be 5 times what I currently pay. Check insurance rates before documenting.

 

[GFC]

On a somewhat related note--

I found out when I was researching my boat prior to purchase that if a boat is titled in the name of an LLC, when it sells there is no sales tax due to the state.

The reasoning for this is an LLC transfers tax free, along with all of its assets. Those assets are normally assumed to be things like office equipment, desks, vehicles, etc. When I asked the Dept of Revenue about boats I learned that boats also are simply considered a part of the assets of the LLC so no tax is owed for the boat.

 

[BandB]

Insurance will be a lot higher for a boat that is documented in a corporation name because it is considered a commercial vessel. I looked into it and my insurance would be 5 times what I currently pay. Check insurance rates before documenting.

Whoever gave you that information was either misinformed or that's how the insurer they used worked. That is not universal.

 

[BandB]

On a somewhat related note--

I found out when I was researching my boat prior to purchase that if a boat is titled in the name of an LLC, when it sells there is no sales tax due to the state.

The reasoning for this is an LLC transfers tax free, along with all of its assets. Those assets are normally assumed to be things like office equipment, desks, vehicles, etc. When I asked the Dept of Revenue about boats I learned that boats also are simply considered a part of the assets of the LLC so no tax is owed for the boat.

Just one word of caution, transferring ownership (actually member's interest) of an LLC differs in every state and can be very complex. There may or may not be many tax consequences, including but not limited to sales tax.

 

[chester613]

My understanding is a "living trust" is NOT a corp. or an LLC. All you are doing is putting up a fire wall so the nursing home can't take it from you if you are unlucky enough to end up in a nursing home. You only need to make sure the trustee is someone you can trust. Otherwise there is no difference in any way. But, I am NOT an attorney. I do watch Law & Order on TV!

 

[Bay Pelican]

The words "estate" and "Trust" in the same paragraph leads me to ask are you talking about a living trust/declaration of trust? These are just pass through entities that are ignored for all purposes other than probate, basically you still own the property but in the event of your death it does not require probate to transfer.

Within the United States and likely Canada the trust ownership will be ignored. Where you might run into some difficulty is in a backwater port outside the US where the official can't figure it out.

General comment, it is good planning that if you are single to have your assets in a trust to avoid probate. Especially if the boat is registered/documented in a state other than your state of residence.

Although remember, the payment of legal fees is the highest and best use of funds.

 

[dwhatty]

Although remember, the payment of legal fees is the highest and best use of funds.

Wish I could have found a way to convince many more clients of that during my 38 years of legal practice for the benefit of my retirement. The realities of small town law practice.

 

[Capt.Bill11]

Whoever gave you that information was either misinformed or that's how the insurer they used worked. That is not universal.

What he said.

 

[Codger2]

What he said.

+2

 

[Drake]

Insurance will be a lot higher for a boat that is documented in a corporation name because it is considered a commercial vessel. I looked into it and my insurance would be 5 times what I currently pay. Check insurance rates before documenting.

When we bought our boat, we asked for insurance quotes with personal ownership or in an LLC, corporation or trust. Not $1 difference in premium.

 

[TDunn]

Insurance will be a lot higher for a boat that is documented in a corporation name because it is considered a commercial vessel. I looked into it and my insurance would be 5 times what I currently pay. Check insurance rates before documenting.

As others have said, this is certainly not universal. Furthermore, when the boat is documented it receives an endorsement for its use. If that endorsement is for recreational the boat can't be used for commercial purposes, so there should be no question about the insurance. If you want to vcharter a documented boat you need a coast wise endorsement.

 

[THD]

Boatguy-to get back to your original question-and since I am an attorney this is not legal advice, but I assume your attorney is discussing a Living Trust. All your assets are transferred to the Trust. You are the trustee and retain total control over the assets. In general, the trust has no effect while you are still living. The purpose of a Living Trust is to remove assets from your estate, only for state probate purposes, not for estate tax purposes. The Trust sets out the disposition of all your property upon your death. It comes into operation only at your death. Your will, once you have such trust, will normally pass any and all assets not already in the trust to the trust. Because your estate is disposed of through the trust rather than through your will, there is no state probate. This scheme avoids the cost and hassle of dealing with probate. Whether you really need it or not is another matter depending on the complexity of probate in your state, the size of your estate and the nature of your disposition plan.

As to ownership issues with the USCG, the marina, et al. there should be no real issues. All these entities should be well familiar with a Living Trust. One previous poster was correct in that copies of all relevant documents should be on board at all times.

 

[seattleboatguy]

Boatguy-to get back to your original question...

Thanks for the feedback, THD. All of your statements are in agreement with my limited understanding of how the Trust should work. It sounds to me that, as far as having my next boat owned by the Trust, the only issue is likely to be the annoyance of explaining all this to the marina / insurance agent / Coast Guard / customs officer who asks the question "So, you're saying YOU don't really own your boat, right???". I guess I should practice my response before I have my first encounter, and as you suggest, have all the paperwork ready to back me up.

 

[IntervaleII]

I'm doing some retirement planning, and my lawyer has suggested setting up a Trust for my Estate. When I mentioned I would be swapping my sailboat for a trawler soon, he suggested letting the Trust be the owner of the boat. Has anyone else done this? Are there implications for things like insurance and leasing a marina slip?

So what would be the problem. I Did this a few years ago as part of my estate planning. Worked with my accountant and my estate Lawyer. It helps in the estate tax issues. This is a smart way of setting up your trust with your hires in mind. Not sure what your estate worth is, we were dealing with a pretty large sum.
My suggestion is to talk with the experts, estate lawyers and accountants, and they will lead you in the right direction, which is not that expensive. Keep in mind, penny wise dollar follish!


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Capt. Don