Shared Ownership

[benjenbav]

I think that it will be very important to have a formal partnership agreement written up, agreed and copied to both families.

This should set out explicitly what costs are shared between the two partners (eg marina fees, insurance etc) and state explicitly these remain joint costs until the boat is sold. This would make such costs legitimate charges on the deceased’s estate. Without such a formal written agreement to refer to, sending an “invoice” for such costs would not be effective.

Agree very much with that.

 

[westernman]

I think that it will be very important to have a formal partnership agreement written up, agreed and copied to both families.

This should set out explicitly what costs are shared between the two partners (eg marina fees, insurance etc) and state explicitly these remain joint costs until the boat is sold. This would make such costs legitimate charges on the deceased’s estate. Without such a formal written agreement to refer to, sending an “invoice” for such costs would not be effective.

This does mean that you are forced to sell the boat or to buy the other half of the boat from the heirs.

Surely it would be better if you got the whole boat if the other person dies. You sell if you wish. (The Joint Tenants form of ownership).

In both cases you would have to pony up for all the costs until the sale anyway. In both cases things can get nasty if the other person does not cough up their part of the running costs, or if one owner wants to sell and the other doesn't.

 

[ylop]

For instance the original buyers could own the shares jointly in equity on the basis that, on the first death, ownership accrues to the survivor. This, of course, is frequently how married couples own property but unlikely to produce the outcome that the boat buying friends want.

Presumably you could agree separately that if either of you were to inherit the whole boat this way, and then sell it that you would pass 1/2 the proceeds to your preferred party. I suspect you can't legally do that / enforce it, so would be basing in on trust rather than contract. Essentially a lot of life insurance works that way to pay the nominated beneficiaries rather than the estate. Your willingness to do that would depend just how good the friendship is (and perhaps if they know and get on with the family too).

Another workaround would be for the boat to be owned by a limited company in which the buyers each owned shares. On the first death, the company could sell the boat and eventually account to the shareholders (survivor and deceased’s estate) for the proceeds. The downside here is more administration, more costs and, perhaps, more tax. It’s something that might be feasible on a >£1m boat; less likely to be so on a <£100k boat and certainly would need specialist advice.

This was my gut feel solution to the question the OP posed. The admin and cost burden will depend on how familiar you are with Ltd co paperwork - it could be a massive PITA or just a bit of admin.

Simplest thing may be for the survivor to invoice the deceased’s estate for a share of bills pending sale and accept that there will be a gap between death and sale and also between death and these bills being paid.

That's a good point - the estate should still be paying the upkeep costs of any of its assets. You wouldn't cancel house insurance and turn off the power in winter for a deceased's house.

hi, yes I agree with what you say but it's not what we want. We need the value in the boat to go to our respective families.

Have you considered adding them as shareholders too? e.g. having (me+my_wife) and (you+your_wife) as the 2 shareholders means if I die, my wife owns half and can sell without waiting for probate. Obviously if she dies first that might leave you with the same situation as today.

 

[petem]

Apologies if I'm over simplifying things but the ownership arrangement and syndicate agreement that I use are as follows:

Mr and Mrs Smith jointly own 32/64 of the boat
Mr and Mrs Jones jointly own 32/64 of the boat

In the event that Mr Smith dies then Mrs Smith has the power to sell their half share in the boat (as per the provisions of the agreement). In the meantime, it is the responsibility of Mrs Smith to pay half of the cost of the upkeep of the boat.

 

[benjenbav]

For instance the original buyers could own the shares jointly in equity on the basis that, on the first death, ownership accrues to the survivor. This, of course, is frequently how married couples own property but unlikely to produce the outcome that the boat buying friends want

Presumably you could agree separately that if either of you were to inherit the whole boat this way, and then sell it that you would pass 1/2 the proceeds to your preferred party. I suspect you can't legally do that / enforce it, so would be basing in on trust rather than contract. Essentially a lot of life insurance works that way to pay the nominated beneficiaries rather than the estate. Your willingness to do that would depend just how good the friendship is (and perhaps if they know and get on with the family too…

Certain financial instruments don’t fall into the estate and nominations for these work separately from probate.

But with assets that do fall into a deceased’s estate it can put the executor (who is a trustee for the beneficiaries of the estate) into a difficult position if something that the deceased would have been free to do is not in the best interests of the beneficiaries.

An example from real life: the estate included a building leased to the deceased’s business. The building was in disrepair and the lease obliged the tenant business to pay for repairs. The remaining directors of the business represented to the executor that Freddie (the deceased) would not have wanted the business to have to pay. They were almost certainly correct and were absolutely acting in good faith. The disrepair had existed for years. Freddie had been aware of it and very familiar with the obligations of the business. It was his asset and his choice. But, for the executor, things were different. He had a fiduciary duty to achieve the best outcome for the beneficiaries and could not waive the estate's rights. (In some circumstances it would have possible for all of the beneficiaries, acting together, to relieve the executor of certain duties, but this was not practicable in the example owing to the class of beneficiaries containing at least one minor.)

 

[benjenbav]

Apologies if I'm over simplifying things but the ownership arrangement and syndicate agreement that I use are as follows:

Mr and Mrs Smith jointly own 32/64 of the boat
Mr and Mrs Jones jointly own 32/64 of the boat

In the event that Mr Smith dies then Mrs Smith has the power to sell their half share in the boat (as per the provisions of the agreement). In the meantime, it is the responsibility of Mrs Smith to pay half of the cost of the upkeep of the boat.

Pretty nifty arrangement that would also allow Mr and Mrs Jones and the widow, Mrs Smith, to sell the whole boat without waiting for probate in Mr Smith’s estate if they all agreed so to do.

Depends on Mrs Smith and Mrs Jones existing, knowing about the project and wanting to be involved, I suppose.

 

[pawl]

Apologies if I'm over simplifying things but the ownership arrangement and syndicate agreement that I use are as follows:

Mr and Mrs Smith jointly own 32/64 of the boat
Mr and Mrs Jones jointly own 32/64 of the boat

In the event that Mr Smith dies then Mrs Smith has the power to sell their half share in the boat (as per the provisions of the agreement). In the meantime, it is the responsibility of Mrs Smith to pay half of the cost of the upkeep of the boat.

Yes, I think this could work for some, but not in our case as one of the joint owners is a widower.

 

[DavidJ]

Yes, I think this could work for some, but not in our case as one of the joint owners is a widower.

….and of course that still could happen during the joint ownership of couples and would nevertheless have to be considered while drawing up the contract.
The only stumbling block I see is maintenance after death before the boat is sold as it seems a complication for the deceased estate. Suggest the survivor picks up the tab. Keep it simple

 

[jfm]

Obvs you don’t want joint ownership. That’s a daft idea. You want to own half (or 32/64 shares in the boat) each, not jointly.

I would have the boat owned by a uk company (assuming you’re happy that it then can’t go on SSR) with you and partner as directors, and owner of one £1 share each.

Company is registered titleholder of boat but not beneficial owner. Company serves merely as unremunerated bare trustee /nominee for the two owners except that it has a power on death of either owner to sell the boat (ie transfer title in it to another, without needing permission from beneficial owners) acting by its then sole director.

With a duty obviously to account to the surviving beneficial owner and the deceased’s estate for 50%+50% of the proceeds.

All this can be done on a few sides of A4 paper online if you know what you’re doing. The company will undertake no transactions beneficially so can file dormant company accounts each year, which takes 5 minutes online.

There is no benefit in kind tax in this structure because the company doesn’t own the boat beneficially; it’s a mere nominee for the 2 beneficial owners.

5 sides of A4 paper maximum, all online, zero cost.

 

[benjenbav]

Obvs you don’t want joint ownership. That’s a daft idea. You want to own half (or 32/64 shares in the boat) each, not jointly.

I would have the boat owned by a uk company (assuming you’re happy that it then can’t go on SSR) with you and partner as directors, and owner of one £1 share each.

Company is registered titleholder of boat but not beneficial owner. Company serves merely as unremunerated bare trustee /nominee for the two owners except that it has a power on death of either owner to sell the boat (ie transfer title in it to another, without needing permission from beneficial owners) acting by its then sole director.

With a duty obviously to account to the surviving beneficial owner and the deceased’s estate for 50%+50% of the proceeds.

All this can be done on a few sides of A4 paper online if you know what you’re doing. The company will undertake no transactions beneficially so can file dormant company accounts each year, which takes 5 minutes online.

There is no benefit in kind tax in this structure because the company doesn’t own the boat beneficially; it’s a mere nominee for the 2 beneficial owners.

Great thought. Involves bits of admin as well as declaration of trust, agreement as to sale and accounts and maybe there’d be a stumbling block in opening a bank account for the company if it doesn’t do any trading? And if no bank account is opened there would be an issue for a buyer of ‘why am I paying money to a different person than the one that’s selling the boat?’

 

[jfm]

Great thought. Involves bits of admin as well as declaration of trust, agreement as to sale and accounts and maybe there’d be a stumbling block in opening a bank account for the company if it doesn’t do any trading? And if no bank account is opened there would be an issue for a buyer of ‘why am I paying money to a different person than the one that’s selling the boat?’

Just unpacking that:

1. Admin at inception = yes as I said there's a need to create 5 pages of A4. The agreement as to sale is embedded in the trust deed, that deed being 2 sides of A4 max. Easy if you know what you're doing. Additionally it will likely need one letter, a single sentence, to HMRC telling them (in response to a Q from them) the company is dormant.

2. Admin annually = accounts, but these are done online by filling in about 4 fields on companies house website and this then creates the accounts and files them for you automatically. 15 mins to open a user ID if you don't have one already, and 5 minutes per annum thereafter. From reading your comment I'm thinking you don't realise how easy and automated this is, these days.

3. Bank account = I've never had a prob opening a bank account for a non trading company (in my personal or business life) using even mainstream banks, let alone the online outfits like Starling, but in any case I'd suggest not opening an account (for the company) and dealing with the reluctant buyer when it happens. Yes some buyers may have an issue but this is all MUCH easier than any alternative solution so far proposed on this thread.

 

[dunedin]

Great thought. Involves bits of admin as well as declaration of trust, agreement as to sale and accounts and maybe there’d be a stumbling block in opening a bank account for the company if it doesn’t do any trading? And if no bank account is opened there would be an issue for a buyer of ‘why am I paying money to a different person than the one that’s selling the boat?’

like you I am not entirely sure about the company idea - but for the eventual sale, the lack of a company bank account would probably not be an issue for the buyer if sell through a broker anyway?
Company or not, a very clear written partnership agreement with specific responsibilities for major costs (like marina fees and insurance) would be the priority for me. We had this for a shared ownership boat a few years back, and was very glad to have it as backup (though never needed to formally apply, as everybody knew and played by the rules).

 

[benjenbav]

Just unpacking that:

1. Admin at inception = yes as I said there's a need to create 5 pages of A4. The agreement as to sale is embedded in the trust deed, thaty deed being 2 sides of A4 max. Easy if you know what 2. you're doing. Additionally it will likely need one letter, a single sentence, to HMRC telling them the company is dormant.

2. Admin annually = accounts, but these are done online by filling in about 4 fields on companies house website and this then creates the accounts and files them for you automatically. 15 mins to open a user ID if you don't have one already, and 5 minutes per annum thereafter. From reading your comment I'm thinking you don't realise how easy and automated this is, these days.

3. Bank account = I've never had a prob opening a bank account for a non trading company (in my personal or business life) using even mainstream banks, let alone the online outfits like Starling, but in any case I'd suggest not opening an account (for the company) and dealing with the reluctant buyer when it happens. Yes some buyers may have an issue but this is all MUCH easier than any alternative solution so far proposed on this thread.

Thanks. You're right - as a member of the gardening department, others had to deal with companies and numbers - we weren't allowed to.

 

[pawl]

I think that it will be very important to have a formal partnership agreement written up, agreed and copied to both families.

This should set out explicitly what costs are shared between the two partners (eg marina fees, insurance etc) and state explicitly these remain joint costs until the boat is sold. This would make such costs legitimate charges on the deceased’s estate. Without such a formal written agreement to refer to, sending an “invoice” for such costs would not be effective.

Hi, and thanks to everyone who responded, it's all been very helpful. We're not quite in the "Sunseeker" class so looking to keep it as simple as possible. I think that Dunedin (and others) is right in that we need a formal agreement, added to Minerva's suggestion of a rolling years worth of funds in the joint bank account with shared ownership, is the way to go. Not ideal for making a quick sale but we don't want to go down the Ltd. company route and there doesn't seem to be any easy way to short circuit the wait for probate.

 

[westernman]

Hi, and thanks to everyone who responded, it's all been very helpful. We're not quite in the "Sunseeker" class so looking to keep it as simple as possible. I think that Dunedin (and others) is right in that we need a formal agreement, added to Minerva's suggestion of a rolling years worth of funds in the joint bank account with shared ownership, is the way to go. Not ideal for making a quick sale but we don't want to go down the Ltd. company route and there doesn't seem to be any easy way to short circuit the wait for probate.

There is, but you did not want to do that.

 

[jfm]

There is, but you did not want to do that.

...for very good reason. It's baffling to me why you keep promoting the completely unsuitable joint ownership idea,

 

[jfm]

Hi, and thanks to everyone who responded, it's all been very helpful. We're not quite in the "Sunseeker" class so looking to keep it as simple as possible. I think that Dunedin (and others) is right in that we need a formal agreement, added to Minerva's suggestion of a rolling years worth of funds in the joint bank account with shared ownership, is the way to go. Not ideal for making a quick sale but we don't want to go down the Ltd. company route and there doesn't seem to be any easy way to short circuit the wait for probate.

There is - it's the company and bare trust arrangement. I fear I'm not doing a good enough job getting across how simple and "10 minutes online" it is to do it this way Best wishes anyway .