Planning Strategies for Your Client's Boat That Are Not Sunk
As summer approaches and open waters beckon, it is important to consider a unique aspect of
estate planning that can often be overlooked by your clients - their boats and watercrafts. These
vessels bring your clients joy and unforgettable memories, but they also warrant special
attention when it comes to safeguarding your clients' legacies as part of a comprehensive estate
plan.
There are several estate planning strategies that can be tailored specifically to boats and other
vessels or personal watercraft. By implementing these strategies, your clients can ensure a
seamless transition of ownership, mitigate potential tax burdens, avoid family squabbles, and
pave the way for future generations to enjoy the pleasures of being out on the open water.
One planning strategy is to use a trust structure for boat ownership. Setting up a trust can
enable your client to maintain control over their boats while simplifying the transfer process. A
revocable living trust allows clients to retain enjoyment during their lifetime while designating
beneficiaries who will inherit the boats upon their passing. This approach helps bypass probate,
ensuring a smoother transition for managing and distributing the boat after your client's passing
and potentially minimizing costs. It is important to note, however, that holding a boat in a trust
may not be ideal from a liability perspective. In case of accidents or damages that result in injury
or death, trial lawyers may try to pursue damages beyond liability insurance coverage limits
based solely on the fact that the boat is owned by a trust. Additionally, transferring the boat to a
trust could potentially incur state or local taxes at the transfer and may increase insurance
premiums.
Another planning strategy involves gifting and lifetime transfers by your client. For clients who
wish to pass on their boats during their lifetime, gifting or lifetime transfers can be viable options.
By transferring ownership of a boat to family members or loved ones, your client can experience
firsthand the joy of gifting them while also potentially reducing estate taxes by removing the boat
from their taxable estate. The downsides to this approach are that your client may need to file a
gift tax return, the boat may become subject to the gift recipient's creditors, and your client will
not have any further control over the boat once the gift is completed.
A third planning strategy that is becoming more popular with boat owners is the use of a limited
liability company (LLC). Establishing an LLC can offer significant benefits when it comes to
managing and transferring boat ownership. By placing a boat into an LLC, your client could use
a trust to own the membership interest in the LLC. This approach may provide personal liability
protection by separating the boat's ownership from personal accounts and property. However, it
is essential to understand not only how changing ownership will impact insurance premiums but
also any other legal and financial considerations specific to your client's jurisdiction. For
example, securing adequate insurance coverage is essential for your client to protect their boat
and ensure a smooth transition in the event of an unexpected loss.
Whichever planning strategy your clients employ, it is important to remember that each client's
situation is unique, so they should work closely with a qualified estate planning professional who
can tailor these strategies to their specific needs and goals. By proactively addressing the
complexities of boat ownership in a client's estate plan, you can help them sail through life's
adventures with peace of mind.
MEREDITH | PC
4325 Windsor Centre Trail
Suite 400
Flower Mound Texas 75028
214-513-1013
This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.
You have received this newsletter because I believe you will find its content valuable. Please feel free to Contact Me if you have any questions about this or any matters relating to estate planning.
