If you own any planes or boats, they probably mean a lot to you. As a result, estate planning and asset protection are vital processes to consider.
The Federal Aviation Administration enforces rules relating to aircraft ownership. Whereas, state laws govern boat possession and transfer, and in North Carolina, the Wildlife Resources Commission is responsible for titling and registration of boats.
Estate planning is necessary to ensure that your desired beneficiaries receive your planes and boats after your death. Meanwhile, asset protection can safeguard your aircraft or boats from seizure, taxation, and creditor claims.
Are Planes and Boats Legally Protected Assets?
You’ve worked hard to acquire luxury assets like planes or boats, and as a result, you’ll want to protect them at all costs. However, these assets could be at risk of seizure without the proper safeguards. While some assets are legally protected—that is, creditors cannot seize these assets to pay your debts—planes and boats are a few exemptions to these protected assets.
For example, if you owe extensive funds to creditors, they may be entitled to seize your property to repay your debts. Alternatively, if someone sues you for negligence, you may need to sell the property to pay your judgment.
Essential Asset Protection Strategies to Safeguard Planes and Boats
Here are a few asset protection strategies to consider:
- Insurance: Having adequate liability insurance is crucial. If someone is injured on your property and sues you, you can use insurance to pay their damages rather than needing to sacrifice your assets. Aircraft and boat liability insurance is part of a wider policy that covers physical damage and total loss of the property, plus medical costs not related to a liability claim.
- Gifting the property: Gifting the property to a family member or friend could protect it against seizure should you be sued by creditors, since it will be owned by someone other than yourself. This strategy could allow you to continue using the boat or plane, but it also allows the legal owner to sell the property without your input.
- Creating trusts: You can also consider creating an asset protection trust for your plane or boat. This process could give a trustee control over the assets within the trust without having the ability to revoke the trust.
It’s essential to approach asset protection strategically. Some asset protection attempts may be considered fraudulent by a judge and could lead to even more severe consequences than your property's seizure.
Estate Planning Considerations for Planes and Boats
Asset protection is only one step in the estate planning process. Just like your other assets, you also want to plan for what happens to them after your death.
Because planes and boats are vehicles, they must have registered owners. When you die, the ownership of these vehicles will not automatically transfer to your designated beneficiaries. Instead, your heirs will need to take a few steps to become the new legal owners.
For example, your beneficiary will need to contact the Federal Aviation Agency to transfer ownership of your aircraft, and this process may generate personal property taxes. Note that for U.S.-registered planes, aircraft ownership is usually permitted only for U.S. citizens and permanent resident aliens.
Taxes are also a consideration for a boat transfer. Besides filing paperwork with the North Carolina Wildlife Resources Commission, your heir will need to complete forms and pay fees to the National Vessel Documentation Center if the boat is of a certain size.
Splitting Ownership of Planes and Boats
If you’re considering leaving your plane or boat to a few beneficiaries, they may have trouble adequately splitting ownership of the vehicle. For example, the registration organization may only allow one name on the vehicle’s title. Instead, you may want to consider instructing the beneficiaries to sell the vehicle and split the profits.
Probate vs. Trust
Without a legal plan in place, most of your property will be subject to probate when you pass away, meaning it will go through a court-mandated process before your heirs can receive it. As a result, your beneficiaries will need to wait sometime before they can obtain ownership of your plane or boat.
If you’d rather spare your heirs from probate, you can place your boats and planes in a living trust, which would transfer ownership of those assets to the trust. Then, when you die, the trustee will be able to distribute the assets immediately.
Our team of experienced attorneys can help you find the right plan for your assets. We have successfully represented thousands of individuals and businesses throughout North Carolina.
Call us today at 919-443-3035 or fill out our online form to schedule a needs-assessment call. We look forward to serving you.
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