Living on a cruise ship… Eternal bliss or the route to a tax nightmare?

Alongside flirting pigeons and cherry blossoms, the rustle of cruise ship brochures in the postbox portend the arrival of spring – even if most of them end up lining trash bins before summer is out.

For many readers, the lure of foreign travel is sweetshop time – in both a positive and an exhaustive sense. I can salivate over luxury accommodation on an exclusive liner calling in San Remo or Croatia as much as anyone. But when you have been looking over 50 or 60 such offers, the capacity to drool soon dries up and the brain haze swirls around the temples.

Cruising is thus adored – and hated; envied and deplored. Jealousy thrives. Someone (who a friend of a friend definitely mentioned) always has a better deal, right?

Imagine then the dilemmas of the truly wealthy when it comes to cruising.

Their choices range into the millions of dollars and cover offerings many multiples larger that what most of us could ever afford. And the crème de la crème of these rich travelers are the Ultra High Net Worth (UHNW) folks among us who like the idea of a world-wide cruise in their own property

Living on a cruise ship – is it for you?

You read it right. There is a small but growing market for people who like to take cruises of several months – even a full year – in duration as they cross from continent to continent, and canal to canal. There is an even smaller, but also growing – market for people who actually buy their own suite of linked cabins on one of the luxury “year-rounders” now sailing the seven seas.

As writer Jill Rachel Jacobs related in a recent article, Tips for Living on a Cruise Ship Year-Round:

“…Morton Jablin lives a simple life. He wakes early, enjoys tea in the afternoon and fish for his evening meal. He’s not much different from you and me, with one exception:  Jablin lives on a cruise ship. For the past 15 years, the 95-year-old retiree has called the Seven Seas Navigator home.”

Jacobs reports that Morton is one of “a host of others” who live full-time on cruise ships. They include “Mama Lee Wachstetter”, 91. She has lived on the luxury Crystal Serenity for the past 10 years. Mario Salcedo (aka “Super Mario) has taken 1,000 cruises, spending 50 weeks a year on Royal Caribbean’s Freedom of the Seas

Living on cruise ships… An international trend?

The US may be the leading market for UHNW cruisers, but wealthy British retired people are not far behind.

According to The Sun tabloid – rich divorcee Mimi Bland, 59, recently ditched her luxury home to fund a new life on the high seas. She is one of hundreds buying cabins on maritime firm Storylines’ luxury residential cruise ship, MV Narrative. From 2027 this exclusive liner will continuously go around the world once every three years, with stops in desirable ports along the way.

To fund her new life, Mimi has sold her three bedroom home worth £500,000 in the Buckinghamshire village of Farnham Common. She still plans to work while on board this ship. She’s started a career as a mindfulness mentor as she escapes the stresses of everyday life in the UK.

Mimi says:

“I want to see the world while working and without ever leaving the comfort of my own home and meet lots of other ambitious people who are looking for a new life of excitement and fun.”

Funding a life on the seas…

The economics are interesting. How can a 60-year-old divorcee, still working, fund such a change in lifestyle?

Mimi dipped into her savings to splash out £850,000 for one of the luxury residences on MV Narrative. She will then spend a further £50,000 a year. This buys her all her meals and access to all the incredible facilities on board.

The current cost of running her home and luxury lifestyle with car and up to five holidays a year is £70,000 a year. Therefore Mimi reckons that she will be £20,000 a year better off living a simpler and more fulfilling life on the liner, while still working.

Mimi, who split with her husband more than 20 years ago and has not remarried, said that the last three years had made her realise that she needed to radically change her life.

She said:

“I think we have all gone through a big change in the last three years and we have realised that many of us are lucky enough to be able to work from anywhere in the world. In my new life, the crew take care of everything and I get to run my business, see the world and meet other executives who are also looking to have a good time.”

The costs…

MV Narrative will have room for 1,000 residents living in 547 fully furnished residences. Living quarters range from the smallest one bedroom cabins of 237 square feet to penthouses of 2,000 square feet. Prices start at £850,000 and rise to up to £6.5 million for the most luxurious apartments. The liner has 11 types of luxury apartment. The most luxurious suite is over two floors with four bedrooms, two bathrooms, a dining room, balcony and walk-in wardrobe.

This luxury vessel has three pools and sundecks and 20 bars and restaurants along with its own microbrewery.

Residents can enjoy a 10,000-book library, cinema and art studio. Sports fans can use an outdoor running track, the latest golf simulators and pro shop and a marina with personal watercraft. The ship also features a 10,000 square foot health center, a fully equipped hospital and an anti-ageing clinic.

Storylines CEO and founder Alister Punton said:

We all have this image of cruises – that they are long holidays for pensioners and people in their twilight years going around the world as couple. Storyline’s superyacht is not like that at all – it is a residential cruise liner for working people and young families who have realised during Covid that they can work from anywhere and they don’t want the hassle and expense of being tied to one property…It is for people who have a wanderlust but also enjoy the comforts of their own home and would find jetting from hotel to hotel too stressful and expensive.”

The ship will dock at ports for between three to five days to allow residents to explore local sites.

This all leads me to a question…what do super-cruisers like Morton and Mimi have in common? Wealth, of course. Additionally they have usually reached the “time-to-slow-down” age.  Another thing? Undoubtedly most of them have teams of very savvy tax advisors on standby.

Young woman in a sea cruise
is life on the seven seas for you?

Living on a cruise ship – where the tax advisor really makes the difference

Before I go further, here is a piece of important tax advice – for Americans in particular. If you are considering the concept of either a permanent or a temporary home on the high seas make very sure that you have explored all the implications of the idea with trusted advisors well before you sign up to heed the call of All Aboard!

The nature of your travel and living arrangements will almost certainly do nothing to ease your tax status and tax liability back in the USA. You must always remember, you are still a full US taxpayer so long as you remain a citizen. This obligation follows you everywhere, unless you make the necessary arrangements to legally give up your citizenship!

There will be no such obligation for Mimi (above) as British law is different. However, Canadian passengers will still have a legal tax obligation of their own. Canadian tax authorities do not consider you non-resident (i.e. not liable for Canadian taxes) unless you do two vital things:

  • Sever your ties to your current tax home
  • Establish ties to another jurisdiction (wherever that may be)

And also remember, there is case law that a ship is NOT another jurisdiction!

If you want to leverage this lifestyle to either reduce or eliminate future tax burdens, then you require expert advice to develop a strategy that achieves the correct result legally and effectively.

Other world cruise possibilities

Apart from the new MV Narrative,  the best known private residential ship is probably The World. Its studio, one, two, and three-bedroom residences range in price from US$2million to $16 million. This does not include annual ship fees for food, drink, services etc. These additional expenses can run between $50,000 and $100,000 per year.

Launched in 2002, The World has 135 “residences” on board spread over 12 decks. It calls itself “the most exclusive floating city on the planet.”

Other new condo ships are on their way through organisations such as:

  • Storylines(starting at $352,000 plus $52,000 per year maintenance fees); and
  • Utopia, with apartments ranging from 1,439 to 6,500 square feet at a cost of US$4-36 million.

They have now been joined by luxury hotels such as the Ritz-Carlton. Their Yacht Collection has announced a second luxury vessel the Ilma (“water” in Maltese) launching in 2024. It will have hot competition from Carnival, Royal Caribbean and Norwegian Cruise Lines. They are all fighting to restore their bottom lines after Covid-hit voyages for the last three years.

The bottom-line

So what’s the bottom-line? Alongside looking at the various purchase options available, wealthy buyers also need to remember to include their tax advisors in their planning and decision. This is not only to avoid hidden tax traps, but also to devise a tax strategy. Doing this could reduce or even eliminate their current tax obligations. After all, getting net closer to gross makes for more money to spend on that new luxury cabin!

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