Living trust vs clearing-in complications

[ejs]

We are planning to leave cruising next year and are putting most of our assets into a living trust to make the process easier for our kids when we croak. I understand all the legal ramifications of doing this so I don't need advice there, but I would like advice about what effect putting the boat in the trust has on the clearing in process in other countries. The trustee will be on the boat. We will be sailing south to Mexico and central America and then across the pacific until it is no longer fun. Can anyone share their experiences (non-theoretical) about clearing in with a boat that is owned by a trust? Does the living trust make things more complicated like a corporation-owned boat sometimes does or is it a non-issue?

TIA, Eric

[Stumble]

Ejs,

I have done this with a few clients, and while it some situations it works in others it becomes a pain. I know a lot of help hu?

The issue is that in some countries having it in a trust may mean it is treated as a corperate vessel instead of just a couple of tourists. My feelings (not a legal opinion) are that a lot of this has to do with which customs agent you get and little with the laws of the country.

To be honest I have questions about the value of doing this unless there are overriding tax consequences, since while you may not be liable as the owner in US tort, in maritime law you are still the operator and therefore liable for damages anyway.

This gets really tricky, and an estate lawyer may not be really prepared to deal with the maritime issues involved. You may want to book some time with a non-commercial maritime/admiralty lawyer to clear these issues up.

[belizesailor]

Have not cleared on trust owned vessels, but have cleared many corp owned vessels. I expect it would be treated the same. The captain technically needs an authorization letter (even if captain is corp owner/trustee). Just a simple one page signed letter has always sufficied for me. Often officials don't ask, but best have it if they do. Never had it cause me any significant issues.

[FSMike]

It didn't make any difference on my ex's boat in the Bahamas, the Turks & Caicos, and the Dominican Republic. We had both of us listed as co-captains but that never came into play. Can't help beyond that.
Have to admit I'm not sure if she had a letter of authorization from the trust but I believe she did.
As a matter of interest after a couple of years she regretted having the trust on general principles.

[BandB]

Originally Posted by ejs

We are planning to leave cruising next year and are putting most of our assets into a living trust to make the process easier for our kids when we croak. I understand all the legal ramifications of doing this so I don't need advice there, but I would like advice about what effect putting the boat in the trust has on the clearing in process in other countries. The trustee will be on the boat. We will be sailing south to Mexico and central America and then across the pacific until it is no longer fun. Can anyone share their experiences (non-theoretical) about clearing in with a boat that is owned by a trust? Does the living trust make things more complicated like a corporation-owned boat sometimes does or is it a non-issue?

TIA, Eric

The latest issues in Mexico highlight potential difficulties. At the minimum carrying additional documentation as to ownership and as to your rights to use the boat could be important.

The issues can vary widely by country and even by specific agent you're dealing with. To me this also adds even more reason to use clearing agents in countries like Mexico.

I assume you've weighed the pros and cons but sounds like you may have just talked to an estate attorney. Any titling and ownership questions such as this also require a maritime attorney or one knowledgeable in the area. Our attorney has a relationship with a maritime attorney so that all issues such as this do get his involvement and advice.

[Stumble]

Something else came to mind.

Whatever paperwork you carry for the trust including use authorization should not only be notarized but also embossed. While in the US notarization can be done by signature alone, in a lot of South America the embossment has a lot of legal weight on its own.

If you move forward I would also think about filling the paperwork with the local courthouse, then have the clerk issue a copy. I know its a little silly, but if there is an issue having a courthouse embossment may also help, then I would carry it both ways.

[maxingout]

The man who leaves no will has spent his money well. I am not worried about leaving stuff to my kids. I am more concerned about not running out of Freedom Chips.

[rw58ph]

Disclaimer: First I am not giving legal advise and this is my understanding as I went through this with my mom/dad estate and my wife and I are presently doing estate planning as I am retiring this summer. So consult with a legal and/or tax attorney.

The major reason for trusts: protection from creditors/liability, avoiding/saving tax, and probate/setting your estate after both of your death. There are two types of trusts 1) irrevocable and 2) revocable.

Irrevocable

Assets in a irrevocable trust are out side of your estate and protected from your creditors liability and defers tax. However, the assets base principle has to remain within the trust, you can not take it out. The trust agreement also acts as your will as to how the assets are to be distributed for you heirs after both of your death. Tax is deferred on the income/increase value until the month is taken out. The income/value above the base principle amount you can with draw but tax has to be paid on with drawn amount. so you only want to put the assets you will not use for the rest of your life, pass on to your heirs and defer tax. So you can create an income stream to live off of, you can not touch the base.

Revocable

Assets in a revocable are still in your estate, subject to your creditors/liabilities and does NOT defer tax. The benefits are it may shield make it harder for your creditors/liability to get to the funds and the most imports setting your estate without probate. If you are on in age there is a benefit to put all you assets except minimal person into the trust as it shorts in the legal expenses and time to distribute to your heirs. Ties it up in one nice neat package.

Person Assets

You principle place of resident is protect from creditors to some extend, so you may elect not to put in the trust. I would NOT put assets in a trust you are going/planning to take out of the country as the title will be in the trust name, not yours, which can/may cause ownership/insurance/finance problems.

Oh, one other thing that might effect your estate planning is comingling of fund. IRA. pensions. 401K/profit sharing and inheritance belong to the individual, no necessarily the spouse. Unless the funds are comingled they remain in your name, so they are somewhat protect from you spouse.

So if you are going to retire and/or inherit you do some personal and estate planning as your assests a protect and you do not trigger tax.

[ejs]

Hello,

Thank you all for your replies I appreciate you taking the time to write them. Let me try my question again, though. I am crystal clear on the implications of a trust and why I might or might not want to use one. I am not soliciting legal advice here, I get that from my lawyer. I also understand as rw58ph and others point out that they "can/may" theoretically cause problems in other countries. My lawyer cannot comment on these issues.

I'm interested in hearing experiences from cruisers who have their boats in living trusts that have cleared into other countries and whether or not the boat in trust actually created any problems.

Cheers, Eric

[David_Old_Jersey]

I appreciate that you want a specific answer (only) - but the responses from any folks who have done exactly what you will be doing (in recent enough times to be of value) is gonna be too small to give certainty across every country you may visit.....and it will only take one country taking a different view to ruin ya day!

My suggestion is that you simply plan for the worst - in this case that the trust will be treated as a corporation. Happy days when not - but paperwork in place (and onboard!) if required. Also might want to bear in mind that Trust law varies accross the world - not so popular with / recognised by all countries (especially where Trustee is also the person behind the assets), albeit in that case likely they only look through the Trust.

Might also want to check into what happens to the boat if you (both?) die abroad - likely that it becomes a foreign situs asset on which local probate should be obtained (same as any other property).........unless someone has enough paperwork to get past customs (to "home") as the "owner".

[JPA Cate]

Why not write to Customs in each of the countries you know you want to visit, and ask them how they handle this situation? Get your computer to translate it into foreign languages, as required, for you, if you don't have friends to help you do the translations.

I have not, in all our years of sailing, met someone who has tried this, and feel concerned that you will not get many answers.

If you do not get answers back, that may give you a hint as to how difficult it might be when you show up there and are not the registered owner.

My two cents.

[blackkayak]

When offering any attested document, (notarized) have the officer apply the embossed seal over a gold paper, stick on seal. They are available from Staples and are worth ten times..........

[BandB]

Originally Posted by ejs

Hello,

Thank you all for your replies I appreciate you taking the time to write them. Let me try my question again, though. I am crystal clear on the implications of a trust and why I might or might not want to use one. I am not soliciting legal advice here, I get that from my lawyer. I also understand as rw58ph and others point out that they "can/may" theoretically cause problems in other countries. My lawyer cannot comment on these issues.

I'm interested in hearing experiences from cruisers who have their boats in living trusts that have cleared into other countries and whether or not the boat in trust actually created any problems.

Cheers, Eric

Then if you want answers only from those who have done it you're not likely to get any answers. Putting boats into living trusts is quite unusual. Then among that very small sample group, you're looking for those who went to multiple countries.

And if your lawyer cannot comment on the issues then you should engage another lawyer or your lawyer should do so. This would have to be a maritime lawyer.

[goboatingnow]

I cannot see why ownership by another entity of the vessel you are captain on , would cause any issues whatsoever. The situation is commonplace enough in the marine world. Ensure you have a letter of authorisation, ( plus notarised copies ), insurance and registration in order and your good to go.

Dave

[hellosailor]

Many notaries in the US will have a rubber stamp, not an embossing seal. And if they have the seal, they may not have any foils for it. Embossing just isn't required and isn't done in most states these days, for ordinary matters.

If you're traveling abroad you may also want to have the papers (trust, appointment of officers, captains, etc.) witnessed by an "APOSTILLE" instead of a notary. From what I've been told, they are respected globally in places where a notary's stamp is dismissed.

If the boat is owned by a trust, does that make it a commercial vessel and subject to the various "Jones Act" statutes ?

I would think that so few vessels are placed into a trust ownership, that anyone claiming to fully appreciate the complications, much less have any experience with them, might be overstating their experience.