Reasons to use a Short-Term Trust

Reasons to use a Short-Term Trust

There’s no reason to try to “get around” to registering an aircraft in trust. Owners sometimes think there are reasons, either financial or personal, why they shouldn’t set up a short-term trust for their newly-purchased aircraft.

Let’s look at one scenario to understand the severity of what might happen:

A foreign buyer needed to register an aircraft in the US for a short period of time, so work could be done on the aircraft before it was exported to its new home country. Since the buyer was not a US citizen, he could not register the aircraft in his name. He reached out to an aunt who was a US citizen and asked her to register in her name instead. She agreed, and according to the FAA records, she became the registered owner of the aircraft.

One day, the DEA visited the local Fixed Base Operator (FBO) to inspect the plane. The inspection showed that the aunt didn’t really own the aircraft, but that the owner was actually a non-US citizen. With this information, the DEA inspector got nervous and seized the aircraft. What did the owner have to do to get his aircraft back from the DEA?

Background on the Drug Enforcement Administration (DEA)

To best explain this situation, let’s first understand the workings of the DEA. Their mission (as printed on their website) is:

The mission of the DEA is to enforce the controlled substances laws and regulations of the United States and bring to the criminal and civil justice system of the United States, or any other competent jurisdiction, those organizations and principal members of organizations, involved in the growing, manufacture, or distribution of controlled substances appearing in or destined for illicit traffic in the United States; and to recommend and support non-enforcement programs aimed at reducing the availability of illicit controlled substances on the domestic and international markets.

To achieve this mission, the DEA is authorized to seize and forfeit an aircraft that is used for these crimes. Title 49 of the US Code, Subtitle VII, Part A governs air commerce and safety. It includes Subpart 46306(d)(1) that allows the DEA or Customs and Border Protection (CBP) to seize and forfeit an aircraft used in violation of registration, marking, and certification laws.

Since 2007, the DEA has seized $3.2b from people who were never charged with crimes. What’s more, between 2006 and 2010 over 400 planes were seized. This data tells us that this is not something to be taken lightly, as the fictitious “foreign buyer nephew” aircraft owner found out.

The Complexity of Releasing a Seized Plane

It’s up to the aircraft owner to prove his innocence. In our situation outlined above, the aircraft owner got tangled in a lengthy and complex legal process that, in addition to the seized aircraft, probably also included fines, a suspended operator certificate, legal fees, and possibly even criminal penalties. Ultimately, he was found not guilty of any wrongdoing, and the aircraft returned to him, but not without much suffering and heartache on his part.

The nephew could have avoided these hardships if he had only known more about short-term trusts. If you need more information, revisit our Short-Term Trust blog. For such a substantial purchase in this highly-regulated industry, there are no such things as short cuts.

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