Whereas most people consider flying to be the quickest way to travel, there are some who enjoy it as a pastime. Owning an aircraft requires FAA registration. To help you understand the process, below are the steps through which a civilian can utilize an FAA aircraft owner trust for a private aircraft. But first, you should know what an owner trust is and how it works.
Imagine a situation in which the ownership of an aircraft is given to a trustee to get FAA registration on behalf of the lawful owner. In this situation, the owner is mentioned as a trustor, or the beneficiary, whereas title and registration stand with the trustee. The FAA delivers all correspondence to the owner trust, and then it gets forwarded to the beneficiary. In an FAA aircraft owner trust, the trustee cannot sell the aircraft without permission from the beneficiary, and the title must be transferred at any time if the beneficiary wants it back.
How to Set Up an FAA Aircraft Owner Trust
Communicate with the flight department.
First, the flight department and aviation counsel both should be informed, because transferring the aircraft to an owner trust requires lots of paperwork and FAA registration. Next, if there is a loan regarding the airplane, the lender bank or authority should be informed; do not risk yourself or the documents without notifying the lender. Communicating with the flight department is important to avoid last-minute transferring before an international flight schedule.
Call your tax advisor.
Transferring an aircraft to an owner trust may have federal and state tax implications. You should involve an advisor who knows FAA requirements well and can therefore chalk out the best tax plan.
Select a trustee and know the charges.
This is the step where you should act wisely. In selecting the right trustee, you can win half the battle. Choosing an experienced company will ensure less hassles and save money, time and energy. Know the charges involved, including initial and annual fees, prior to signing the contract.
Complete KYC for the trustee.
Gather the trustee’s due diligence information and review the trust agreement. Note that you will need to inform the trustee of any timeshares, subleases, or other relevant agreements.
About the Process
- Before the trustee accepts an individual as their customer, they are required to perform due diligence, which is why they need all of the documents.
- By signing a contract, an individual announces himself as the trustor and the selected company as the trustee. Upon signing, the trustee should also provide a legal document claiming to meet all benchmark set by the FAA.
- A trustor may need to provide a tax exemption certificate, depending on the tax plan.
- If the trustor needs to make an international flight shortly after registration, the trustee should file a Declaration of International Operations based on information provided by the trustor.
Purchasing an aircraft is not the end of the process. Rather, registering the aircraft is complex. It varies with each case; therefore, for the sake of taxes, values and cost reduction, you should hire Aviation Trust Company to get 360-degree service.