Plan For Ownership Structure And Operating Costs Of Yachts

Yacht owners tend to follow just a few trajectories on the way to buying a vessel. Many yacht rental dubai who are building a custom boat have owned a series of vessels and the current plan is a step in that progression. Others have frequently chartered or been guests on yachts and decide to upgrade to their own. And some have had a liquidity event and see a yacht purchase as an opportunity to use the boat’s depreciation to their advantage. Where the boat will cruise and whether guests will be family members, friends or business associates can impact insurance and tax considerations, and may also influence choices about financing the project, so a banker will be interested in learning a lot about an owner’s interests.

Yachts join aircraft and secondary homes as assets that are often owned by trusts or limited liability companies. While these structures may shield assets from creditor claims, they also introduce specific requirements that can add complexity to plans for funding the financing and operation of a lifestyle asset as resource intensive as a yacht.

Even wealthy and sophisticated clients can be shocked by the full costs of operating a yacht – it’s not rare for these expenses to annually reach more than 10% of the vessel’s purchase price. Funding those operating costs while observing the rules of a limited liability company or trust while also preserving other areas of lifestyle spending demands careful planning and attention to detail.

The trustee would need to plan for funding the yacht’s operation for the lifetime of the asset and make sure sufficient liquidity is available when needed. A vessel that cost $40 million to buy or build could cost $5 million a year to operate, including fuel, docking, crew expenses and insurance. Hedging 10 years of expenses would require the ownership entity to hold $50 million of investments in relatively safe assets such as cash and high-grade bonds. That allocation should be considered in the context of other priorities, such as family members you wish to support, philanthropic intentions and the lifestyle you want to maintain.