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Old 09-28-2016, 08:42 AM   #1
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Documenting a boat in a Trust?

We are working to Re-document the boat we just purchased. It was Documented in the name of a Trust. Try as I might, I can not find the advantages, and would really appreciate some input. The Admiral and I already have a trust, though found it a bit of pain to transfer properties we owned into, or out of the trust. If it is just another way to transfer ownership to our children should something happen to us, seems it would be accomplished via our Will. Is there a simpler solution?
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Old 09-28-2016, 09:01 AM   #2
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Actually a trust or an LLC isn't a bad idea. If it is in your will, isn't there a possibility it would go into probate?
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Old 09-28-2016, 09:19 AM   #3
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A corporation or an LLC can pass title to a new purchaser with no sales tax due. You just sell the LLC, not the boat. A trust is different as generally it can't be sold. Its internal documents say what happens to the trust assets when the primary owner dies. A trust is mostly used in this case to hold assets outside of estate tax.


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Old 09-28-2016, 09:28 AM   #4
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Originally Posted by djmarchand View Post
A corporation or an LLC can pass title to a new purchaser with no sales tax due. You just sell the LLC, not the boat. A trust is different as generally it can't be sold. Its internal documents say what happens to the trust assets when the primary owner dies. A trust is mostly used in this case to hold assets outside of estate tax.


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Most trusts (at least the types used for boats and similar property) won't avoid estate tax, but could avoid probate. The main advantage of that is privacy. Personally, I think a trust would generally be more trouble than it's worth.

However, an LLC is a better way to hold title. It might facilitate transfer without sales tax (check local laws on that) and it could give some liability protection.

One thing to be careful about is local personal property taxes. Some jurisdictions will take the position that any asset held in a corporation or LLC by definition is a business asset and try to tax it. Check with an expert in your area.
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Old 09-28-2016, 11:15 AM   #5
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You are asking for legal advice on a boating forum. Any advice you get here is worth exactly what you pay for it.


That said, here is my advice: You already have a trust so that means you have an attorney. Ask him or her what is best in your situation.
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Old 09-28-2016, 11:35 AM   #6
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Originally Posted by Ransom View Post
We are working to Re-document the boat we just purchased. It was Documented in the name of a Trust. Try as I might, I can not find the advantages, and would really appreciate some input. The Admiral and I already have a trust, though found it a bit of pain to transfer properties we owned into, or out of the trust. If it is just another way to transfer ownership to our children should something happen to us, seems it would be accomplished via our Will. Is there a simpler solution?
Ransom,

Assume the boat is currently in your name, and you have a FL title and you've paid the sales tax on it.

The trust is a very useful tool and will work well to have the boat be owned by a trust. I'm going to encourage you to do it yourself and get familiar with trusts and you can then use them for other things. Anything that you want to by pass probate a trust is good for. Also, good for items that have liability risk, like things that move (cars, boats, planes), but insurance is still the first line of defense.

Trusts have a LOT of privacy.... no one knows who owns your things and there's not a public record to tie you to ownership (the public only sees the trustee). It's easy to sell things owned by a trust, just with an assignment of beneficial interests. There's a strong argument to have a separate trust for each thing. These are just a few basics but I'd encourage getting some education. The trust is not bullet proof and can be sued (but not often, however better the trust than you). These are revocable trusts, not irrevocable trusts.

You can be the trustee, or a good and trusted friend. There are trusted attorneys that offer this service in FL, but not necessary for a boat or car, usually. If you trust your kid (or whose getting the inheritance) they would make a great trustee (and executor), makes it simple. You'll also want a successor trustee and beneficiary (or two) in case of death.

There's tons of good books on trusts out there, and a few classes.

Yes, it will bypass probate.

================
The corp or LLC is another entity, but not a big fan of it. The multi-member LLC and the corp will give you some liability protection, but won't protect you from negligence as captain (the trust won't, either). Also, both the corp and LLC require costs to set up, annual reporting and fees, and are public record. There are places for them, but would argue the trust makes a better entity for boats.
================

Yes, to put property in trust do it in the documentation process. They are pretty easy to work with, give them a call and tell them what you want to do. 800-799-8362. Personally, I'm not a fan of having a documented boat for pleasure boating in and around the US, as I see no advantage, but perhaps others will give a reason why they do it. Also, being under homeland security, things change often and could be totally different today vs. when I did my last one a few years ago.

You'll need FL registration on it after you get the documentation. Take your documentation to the FL dept of revenue (where you register your car or boat) and fill out the forms for registering a non-titled vessel, Form: HSMV 87244 (Rev. 11/11)

You are simply transferring the title (documentation) for estate purposes and that is NOT taxable. However, there will be a registration fee and transfer fee ~$150.

There are some items that you will or may need depending on the clerk...

Need for sure:
Documentation
Registration Form
Check

You may need:
Trust Agreement pages, usually the first two and last one, showing the name of the trust, trustee, trustees powers, and acceptance by the trustee (signature). They do not see the beneficiary and it's none of their business and protected by FL statue (Florida Statute 689.071 for more info). You can also have a affidavit of trust, last page of Procedure TL-21, which is Certificate of title applications involving trust agreements.

Bill of Sale, should not be required because it's already sold to the trust
If your trustee is a Corp or LLC, you may be asked for a paper that says you have the right to sign for that entity. (I've had that happen once). Another note: If you use a corp or LLC as a trustee, the USCG has you sign that the trustee (owner) is a citizen of the US, but that was never challenged. There could be an argument to have an individual as the trustee.

There is a time delay in getting the documentation back, usually several months, so you would just do the process after you get it back from the Coast Guard and use your current registration to operate it.
Overall, its not bad.

=====
Disclaimer: Not an attorney, nor an advisor. Have done a lot of trust work, mostly with real estate and estate planning. Have done several with boats, cars and other dangerous toys. Also, go to continuing education on trusts every other year or so. Have created hundreds of trusts, and act as trustee for others.
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Old 09-28-2016, 11:43 AM   #7
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Originally Posted by djmarchand View Post
A corporation or an LLC can pass title to a new purchaser with no sales tax due. You just sell the LLC, not the boat. A trust is different as generally it can't be sold. Its internal documents say what happens to the trust assets when the primary owner dies. A trust is mostly used in this case to hold assets outside of estate tax.


David
The sale of a trust is by assignment of the beneficial interests. Easy and not recorded anywhere. The new beneficiary can also replace the trustee, if wanted, but may show up on public record, depending..... I just did one last Sunday. Was a house deal, but created a trust for the seller, the seller assigned the beneficial interest to the buyer. Not too difficult, but does require some education.

The primary owner is the beneficiary. When he dies the successor beneficiary takes over. A trust may or may not eliminate estate tax, I'll let a trust lawyer comment on that one.
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Old 09-28-2016, 02:16 PM   #8
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You are asking for legal advice on a boating forum. Any advice you get here is worth exactly what you pay for it.

That said, here is my advice: You already have a trust so that means you have an attorney. Ask him or her what is best in your situation.
Here's your answer. Your attorney needs to explain to you what the advantages are of having assets owned by the trust. The advantages of having the boat owned by the trust are exactly the same as the advantages of having any of your other assets owned by the trust.
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Old 09-28-2016, 02:34 PM   #9
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Here's your answer. Your attorney needs to explain to you what the advantages are of having assets owned by the trust. The advantages of having the boat owned by the trust are exactly the same as the advantages of having any of your other assets owned by the trust.
That's a good point, and nothing wrong with consulting a professional. First, I'd be SURE the attorney was well versed in trusts. Some slept thru trust class. And Second, there's a STRONG argument to get up to speed with some books or perhaps a class on trusts. It's hard to make intelligent decisions without a bit of knowledge.

You "can" write your own, and have a lawyer review it. There's a lot of boiler plate trusts out there that one can get and just go thru them and modify to one's liking, after the learning process.

As for "legal" advise on a forum being worth what you paid, agreed, but that's for personal info. General ways to do legal things can be understood with info from forums and reading up on it a bit.

Heck a lot of us to thing that are under the realm of professional services. Medical, Financial, Legal, and even boat maintenance. And a lot of professionals will not agree on how to do things, so how do you decide?
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Old 09-28-2016, 02:51 PM   #10
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FWIW, I have a loan on my boats. I am able to deduct the interest on the boat as a second home. I am not sure that I would be able to do that if it was held in a trust or in an LLC.
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Old 09-28-2016, 05:05 PM   #11
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........... You "can" write your own, and have a lawyer review it. There's a lot of boiler plate trusts out there that one can get and just go thru them and modify to one's liking, after the learning process.
A trust only comes into play when you are dead. If you want the peace of mind of knowing your estate will be handled the way you want it to be handled, you will have this done by a law firm that specializes in trusts and estates.

Changing your own oil or doing your own boat waxing is one thing. Don't suggest that a lay person can do something by reading a couple books that lawyers study for years to learn and understand.
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Old 09-28-2016, 05:12 PM   #12
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A trust only comes into play when you are dead. If you want the peace of mind of knowing your estate will be handled the way you want it to be handled, you will have this done by a law firm that specializes in trusts and estates.

Changing your own oil or doing your own boat waxing is one thing. Don't suggest that a lay person can do something by reading a couple books that lawyers study for years to learn and understand.
I think there is a difference between the knowing how and the knowing when. I have created a number LLC's. It is stupidly easy (after all, I did it). What is more difficult is knowing when to create an LLC. I used my attorney and accountant to tell me the when and I did the paperwork to actually get it one. An LLC is a lot easier than a Trust however but I think the same principle would apply.
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Old 09-28-2016, 06:15 PM   #13
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A trust and an LLC are different and used for different purposes. Everything in my trust is controlled after I am gone. Who gets what and how much. The trust even protects my children and grandchildren from losing their share from divorces or court actions.
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Old 09-29-2016, 02:59 PM   #14
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FWIW, I have a loan on my boats. I am able to deduct the interest on the boat as a second home. I am not sure that I would be able to do that if it was held in a trust or in an LLC.
You would, at least with a trust. Both the deed and the mortgage on our home is in the name of our trust. Does not affect our ability to deduct the mortgage interest.
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Old 09-30-2016, 03:27 AM   #15
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FWIW, I have a loan on my boats. I am able to deduct the interest on the boat as a second home. I am not sure that I would be able to do that if it was held in a trust or in an LLC.
Not true, you have equitable interest.
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Old 09-30-2016, 03:43 AM   #16
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A trust only comes into play when you are dead. If you want the peace of mind of knowing your estate will be handled the way you want it to be handled, you will have this done by a law firm that specializes in trusts and estates.

Changing your own oil or doing your own boat waxing is one thing. Don't suggest that a lay person can do something by reading a couple books that lawyers study for years to learn and understand.
WesK,

There are MANY trusts that are useful when your alive and they come and go as needed. Death is one small part of trusts.

To each his own, and it doesn't take years to learn trusts, but there is an argument for staying current. Learn the ones you will use, but it's not hard to figure that out. And, yes, if you need the nitty gritty of all kinds of trusts, it will take some time. And if you have more "parts" you may need more trusts... like kids, grandkids, wife, GF, toys, houses and others you may wish to help. Now add divorce, incompetent kids, family that fights, ex spouses and it get more complicated.

Nothing wrong with involving an attorney, but I'd argue strongly to get educated first. Also nothing wrong with hiring a mechanic. Changing the oil is only the simple part. Some people have an aptitude for understanding this stuff and some don't.

Would be nice to have a trust attorney on this forum.
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Old 09-30-2016, 06:18 AM   #17
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FWIW, I have a loan on my boats. I am able to deduct the interest on the boat as a second home. I am not sure that I would be able to do that if it was held in a trust or in an LLC.
Not a problem. The beneficiary of a trust is considered the owner for purposes of deducting the interest.
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Old 09-30-2016, 06:24 AM   #18
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A reason that has not been mentioned for having the boat in a trust is that frequently the boat is documented/registered in a state other than the state of residence of the owner. If the owner or both owners if joint tenancy die and the boat is documented/registered out of state you can end up with two probates. While paying lawyers is the best use of money, some people actually would like to reduce their legal fees. If the boat is owned in a trust the likelihood of a second probate is reduced as the ownership of the boat transfers automatically according to the terms of the trust.

We frequently see the same issue with out of state second homes where the second home is held in a residential trust to avoid probate in the 2nd state.
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Old 09-30-2016, 08:59 AM   #19
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A reason that has not been mentioned for having the boat in a trust is that frequently the boat is documented/registered in a state other than the state of residence of the owner. If the owner or both owners if joint tenancy die and the boat is documented/registered out of state you can end up with two probates. While paying lawyers is the best use of money, some people actually would like to reduce their legal fees. If the boat is owned in a trust the likelihood of a second probate is reduced as the ownership of the boat transfers automatically according to the terms of the trust.

We frequently see the same issue with out of state second homes where the second home is held in a residential trust to avoid probate in the 2nd state.
Marty,

Very good point. The trust will avoid probate. And FWIW, no one knows who the beneficiary is unless you tell them. Also, no one knows the situs of the trust, and if you want to be sneaky, you can change it on a moments notice, if someone is getting too close to you. (I've never had to do that, but I subscribe to keeping a low profile and keep my things in order to minimize risk and potential asset loss).

Now, it's my understanding that a documented boat has no state as documenting is a federal process thru the Coast Guard If it's registered in a state, then it's assumed to be "living" there. One "could" avoid state registration by never meeting the requirements of that state... i.e., in FL if it's in the state for over 6 months, then it needs to be registered. Other states may or may not be similar, but ya gotta "keep moving".

Probate is ugly, there's a LOT of reasons to avoid that.

Also, I'm surprised how many people don't do any estate planing or use more trusts for expensive or dangerous assets, but if everyone did, the government would probably tax it.

Kudos to Ransom for taking the time to find out.
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Old 09-30-2016, 03:50 PM   #20
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A reason that has not been mentioned for having the boat in a trust is that frequently the boat is documented/registered in a state other than the state of residence of the owner. If the owner or both owners if joint tenancy die and the boat is documented/registered out of state you can end up with two probates. While paying lawyers is the best use of money, some people actually would like to reduce their legal fees. If the boat is owned in a trust the likelihood of a second probate is reduced as the ownership of the boat transfers automatically according to the terms of the trust.

We frequently see the same issue with out of state second homes where the second home is held in a residential trust to avoid probate in the 2nd state.
In South Florida, both LLC and Trust ownership of homes and boats is common. Now, one trend is an LLC in a trust. In FL, a trust can be the sole member of an LLC. This works well for personal property. In our neighborhood about 40 % of the homes are owned by an LLC and 15% by a trust, but a lot of those owned by an LLC are in a trust.

For a boat traveling outside the US this does add some paperwork requirements to be able to prove at all times rights and ownership.

Certain forms of trusts can also own income producing LLC's and Corporations, but this is definitely not DIY work as it can have significant tax consequences. I strongly recommend an attorney and an accountant in those situations. Also when it comes to homes and boats, one needs to be very careful that the form of trust gets any tax exemptions an individual gets.

I recommend at least some estate planning with an attorney specializing in that area for all. I've seen people spend tens of thousands after a death when hundreds prior to death would have saved it all.
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