Aircraft Purchase: Frequently Asked Questions

Q: Can a foreigner own an American registered aircraft?
Yes. The general rule is that only US citizens and green card holders can own American registered aircraft. However, there are three exceptions to this rule:

1. Foreign corporation - if the aircraft will be flown at least 60% of its flight time in America it can be registered to a US corporation which is foreign owned provided that regular returns are filed with the FAA proving its flight time in America.

2. Owner Trust - If the aircraft is settled in trust with a US trustee it may be beneficially owned by a foreign person or company.

3. Voting Trust - If a US corporation is structured so that not less than two thirds of the Directors and Officers are US citizens and not less than 75% of the voting rights in the shares of the corporation are settled in trust then that corporation can be the registered owner of a US aircraft and may be owned by a foreigner.

Q: What is a Trust?
A Trust is quite simply an agreement between one person (the settlor) who gives to another person (the Trustee) an asset, in this case an aircraft, to hold on certain terms. In the case of an Owner Trust the aircraft is typically held solely for one beneficiary which is the settlor. The reason that a Trust is required by the FAA is that in this way they can ultimately control the aircraft through their US Citizens who are the registered trustees of US registered aircraft.

Q: Owner Trust or Voting Trust?
This will depend upon the beneficial owner's circumstances and on which our associated Aviation Legal Team will be happy to advise. Usually Owner Trusts are more suitable for owners of one aircraft and also for businesses seeking to recover capital allowances and tax relief. Voting Trusts are commonly used by aircraft dealers and in complex financing transactions.

Q: Can the US Trustee sell or mortgage the aircraft?
Yes. In fact the US Trustee has all the rights and powers of an owner and can sell or mortgage the aircraft subject always to the terms of the Trust agreement between the Settlor and Trustee. It is a requirement of the Federal Aviation Regulations that the power of the trustee cannot be "fettered" by the beneficiary. This dilemma can be solved where the Registration Company has adequate fidelity insurance cover. This particular type of insurance will protect the beneficial owner in the event that the Trustee commits a breach of trust and sells or mortgages your aircraft without permission. It will also cover the situation where, as has happened in the past, an individual Trustee has simply gone away.

Q: How do we protect you?
We take the following steps to minimize your risk and maximize your security:-

1. Our aviation legal team liaises with a professional Registration Company specializing in the registration of US registered aircraft for foreign owners. Our legal team probably has more experience in this field than any other business.

2. With the exception of dealers' aircraft, we aim to register all aircraft under our administration as individual owner trustee corporations. This is important because the Trust agreement which the beneficial owner of the aircraft will have to sign will include indemnities in the event that the trustee is sued. Where an individual or a Trust company which registers itself directly as the owner of the aircraft is sued then they will claim against you under its indemnity. Where the Trustee is a separate trustee corporation for your use only, then you get the added protection of being able to rely on its limited liability for your protection.

3. Through the efficiency of service that our aviation legal team provides, we ensure that the aircraft you purchase is registered on the American Register (or any other register) in the quickest possible time thereby allowing you to fly legally.

4. We ensure that you have not just the trust and registration documentation but also all ancillary documents required to legally operate the aircraft internationally including a radio station license.

5. All State and Federal government documentation received by our Delaware registered agents is forwarded promptly.

Q: What does it cost?
Registering the aircraft as well as setting up the trust and managing the trust naturally aren't free. The cost varies depending on the aircraft and the complexity of the set up. However, it is really insignificant compared to the rest of the setup and annual running costs. For more information please feel free to contact us.

Q: Why is there an annual administration fee?
To cover annual running costs in providing a Trustee corporation. These include the cost of directors' fees, registered agent charges, state franchise tax, professional indemnity and fidelity premiums, filing of federal tax returns and the like. These charges are all included within the annual administration fee.

Q: Does the Trust need to be administered offshore?
No. The trusts which hold title to US registered aircraft are fiscally neutral (neutral for tax purposes) and there are no tax advantages in being administered offshore. In the past, one advantage of offshore administration was confidentiality, but since the Organization for Economic Cooperation and Development (OECD) imposed its requirements on offshore centers, there is a growing exchange of information in respect of specified crimes such as tax evasion and money laundering.

Needless to say, that Speedbird Air Ltd and our associated Aviation Legal Team preserve client confidentiality to the maximum extent permitted by law and will only release information with our client's permission or by court order.

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