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What is an Aircraft Trust and How Does it Work?

What is an Aircraft Trust

What is an Aircraft Trust and How Does it Work?

Civil or general aviation is a popular pastime in the United States, both for pleasure and business. For those who are interested in FAA registration for a privately-owned airplane, here are some answers on how trusts work.

Who is eligible to register an aircraft in the US?

An aircraft may be eligible for FAA registration if it is not registered in another country. To qualify for registration, the aircraft owner must meet these requirements.

The aircraft owner must be:

  • An individual who is a US citizen.
  • A partnership where each partner is a US citizen.
  • A corporation or association organized under US or State laws of which the president and at least two thirds of the board of directors and other managing officers are US citizens and at least 75% of the voting interest is owned or controlled by US citizens.
  • An individual citizen of a foreign country lawfully admitted for permanent residence in the US.
  • A US government unit or subdivision.
  • A non-US citizen corporation organized and doing business under the laws of the US or one of the States as long as the aircraft is based and primarily used in the US. Sixty percent of all flight hours must be from flights starting and ending within the United States.

What if an aircraft owner does not meet FAA requirements?

Foreign nationals and others who are not eligible for aircraft ownership under the FAA requirements may still be interested in registering their aircraft. For these individuals, establishing a trust is the best way to maintain FAA registration in the United States.

What is an aircraft trust?

An aircraft trust is set up to give the airplane ownership to a trustee who meets the FAA registration requirements on behalf of the true owner. In the trust, the true owner is known as the trustor or trust beneficiary. The title and registration are held in the trustee’s name. The FAA has access to aircraft trust filing paperwork, giving them the identity of the beneficiary.

What are the advantages of a trust?

Trusts are primarily set up when aircraft owners do not meet the requirements to register their airplane with the FAA. The FAA is widely accepted, and aircraft that maintain their registration generally have higher resale values.

While FAA registration is the primary reason for aircraft trusts, they also might be set up for structural purposes, simplification purposes, or convenience. Whatever the reason, a trust can be maintained for an indefinite period of time.

How does an aircraft trust work?

  • A plane is placed in trust and the title of the aircraft is registered to the name of the trustee. The beneficiary of the trust owns a beneficial interest in the trust.
  • All correspondence from the FAA goes to the Owner Trustee, who then communicates that information to the beneficiary.
  • The trustee cannot sell the aircraft without the beneficiary’s permission, but the beneficiary can dissolve the trust at any time for any reason.
  • The title can be transferred back to the beneficiary at any time, although they may not be able to maintain the FAA registration.
  • An operating or lease agreement is created between the beneficiary (or a separate 3rd party) and the trustee, giving the right to operate the aircraft back to the beneficial owner.
  • The Operator is obligated to insure, maintain, and operate the aircraft in accordance with FAA requirements.

What are the Laws on Aircraft Trusts?

U.S registration of aircraft through the use of aircraft trusts (also known as owner trusts) has been approved by the FAA for approximately forty (40) years and is recognized in relevant FAA regulations. Also, Aircraft Guaranty thoroughly vets its trustors before they are ever put in trust. We work diligently with our customers to comply with any registration requirements of the FAA and to obtain information and disclosure necessary to satisfy internal requirements of Aircraft Guaranty.

Aircraft Guaranty can set up your trust account for FAA Registration. We’re here to help answer your questions and help with all aspects of aircraft trusts.

Comments

  1. Hi,

    I’m British/Canadian and reside in Canada. I’m in the process of buying a Beech Baron and wish to keep it US registered. Could you help me with this?

    I understand the restrictions of “alien” restoration and the requirement to register through a trust.

    All the best,

    Peter Scott

  2. Hello
    I am trying to establish how a trust arrangement to allow for the ownership of an “N” registered aircraft can be broken where the Trustor signatory is unwilling to cooperate. The beneficial owners wish to sell the aircraft but the Trustor signatory is uncooperative.

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