Aircraft in a Trust?

[Stan]

Does anyone have their aircraft in a trust?

Why or why not?

 

[1980Mooney]

1 hour ago, Stan said:

Does anyone have their aircraft in a trust?

Why or why not?

What exactly are you trying to achieve?  Avoid liability?  That won't work - you are the pilot and it goes right to you personally, trust or no trust or even if you don't own a plane and are renting.  Avoid tax? - don't see how.  Estate planning?

I am not a lawyer but if you are the Owner and the Trustee and the Pilot then the whole thing looks like a sham.

Here are the 2 biggest issues highlighted by BizJet Law.com:

There are two downside considerations regarding holding your aircraft title in an owner trust: (1) cost and (2) separation of ownership.

1. Costs

As with all operations, there is a cost associated with using an owner trust. The cost varies by provider and trust type. From our experience, normal owner trust costs start at a little over $4,000 for the setup and nearly $3,000 per year. Thus, for a normal owner trust, you should expect to pay around $7,000 at the closing for the first full year and then around $3,000 yearly.  For a double-blind owner trust, the setup cost tends to be around $5,500 with a yearly fee of $5,500, meaning at the closing for the first full year, you should expect to pay $11,000.

2. Separation of Ownership

By putting your aircraft in an owner trust, you are placing a separation of ownership between the true owner of the aircraft and the asset. The aircraft is not registered to the true owner but to the owner trustee. Further, any communication from the FAA regarding the aircraft is sent to the owner trustee, who is responsible for forwarding the information to the beneficiary. So long as the relationship between the true owner and owner trustee is positive, this should have no downside. However, suppose the true owner is concerned about a lack of communication or a negative relationship with the owner trustee. In that case, this could be a disadvantage of holding the aircraft in an owner trust.

[M20F]

The only advantage I would see would be a Wyoming Dynasty trust and if you are looking at those you got the $$’s to talk to a professional.  

[BillySpace]

Yep, I’ve got mine in a trust. It helps with estate planning, liability protection, and avoiding probate. Some folks skip it, but for me, it adds peace of mind. Definitely worth considering if you're planning long-term.

[midlifeflyer]

In this area, we are typically talking about revocable family trusts in which the “settlor’ (the person who creates the trust and adds property to it) is also the beneficiary and can undo the trust at any time while alive. 

Like any revocable family trust, its two major functions are (1) avoiding probate and (2) providing for assert management if you are incapacitated. 

I’m not aware of any state in which it provides any liability protection. I suspect that, kind of like LLCs, lots of people think it provides personal liability protection for bad things we do, but it doesn’t. 

Whether this or any other estate/financial planning mechanism provide you any benefit at all is a discussion between you and a legal professional.

[BrettD]

Generally you don't want to own any assets personally, you want to control them.

I have my airplane in an out of state LLC. It provides anonymity because when you check the N number it doesn't have my personal information.

An LLC can stop lawsuits cold because typically a lawyer will use a system like LexisNexus to determine what kind of assets can be seized to pay judgements. If they see you have tons of assets then they'll pursuit litigation... if you don't have any assets(houses, businesses, investment accounts, bank accounts, vehicles, etc)  they may conclude you are a pauper and it isn't worth their time (there's no point winning a lawsuit if you cannot collect).

Lawyers can try to figure out who owns an LLC, but is not a simple computer search. It involves a lot of red tape, courts, and discovery. It might not be worth their time and they would have to know the LLCs exist to begin with.

In some cases you can also avoid paying sales tax on the purchase by using an LLC in a state with no sales tax.

Edited April 17 by BrettD

[GeeBee]

On 4/17/2025 at 9:59 AM, BrettD said:

Generally you don't want to own any assets personally, you want to control them.

I have my airplane in an out of state LLC. It provides anonymity because when you check the N number it doesn't have my personal information.

An LLC can stop lawsuits cold because typically a lawyer will use a system like LexisNexus to determine what kind of assets can be seized to pay judgements. If they see you have tons of assets then they'll pursuit litigation... if you don't have any assets(houses, businesses, investment accounts, bank accounts, vehicles, etc)  they may conclude you are a pauper and it isn't worth their time (there's no point winning a lawsuit if you cannot collect).

Lawyers can try to figure out who owns an LLC, but is not a simple computer search. It involves a lot of red tape, courts, and discovery. It might not be worth their time and they would have to know the LLCs exist to begin with.

In some cases you can also avoid paying sales tax on the purchase by using an LLC in a state with no sales tax.

Yeah, sure, of course! Some lawyer is going to spit out the bit of pursuing a 7 figure litigation because it is too hard to track down the LLC. Do you really believe this? 

[BrettD]

7 hours ago, GeeBee said:

Yeah, sure, of course! Some lawyer is going to spit out the bit of pursuing a 7 figure litigation because it is too hard to track down the LLC. Do you really believe this? 

Not all litigation involves a seven-figure airplane crash. Remember that someone can sue you if they fall in front of your house because it was slippery or "didn't have the right kind of railing". Or they can magically have "back pain" in a minor car fender bender.

Someone like yourself has assets under your name? That makes you an appealing target for litigation. The lawyers look your name up in LexisNexus and lick their chops, they love people with collectable assets that are easy to locate.

Edited April 19 by BrettD

[exM20K]

On 4/16/2025 at 3:58 PM, Stan said:

Does anyone have their aircraft in a trust?

Why or why not?

 

This is a question for your lawyers and accountants, not one for internet strangers. 

-dan

[GeeBee]

9 hours ago, BrettD said:

Not all litigation involves a seven-figure airplane crash. Remember that someone can sue you if they fall in front of your house because it was slippery or "didn't have the right kind of railing". Or they can magically have "back pain" in a minor car fender bender.

Someone like yourself has assets under your name? That makes you an appealing target for litigation. The lawyers look your name up in LexisNexus and lick their chops, they love people with collectable assets that are easy to locate.

I don't have to work hard to find out who to sue with an LLC. An LLC is required by law to list with the State in which it is registered a physical address for an "agent for service". I simply go to that states corporations website, I find out who that is, serve them with a suit. Move for discovery (which is a given) where the agent for service has to disclose all the officers of the LLC and it's over. Worse an LLC with a sole asset, an airplane is prime bait for "piercing of the corporate veil". As one aviation attorney said to me, "I move through LLCs like a hot knife through butter". It is easy because with the LLC with an airplane as its asset is fundamentally under capitalized from the get go and not a going business concern (tax returns provided in discovery will prove that). Judge will think about two seconds on a motion to pierce. All of that is about 4 hours of lawyer time.

Unless the LLC holding the aircraft, rents it to you, you provide periodic rental payments, show a positive cash balance in the LLC's account, insure the aircraft as a rental and maintain it as a rental meaning 100 hour inspections your corporate veil is an illusion of protection.

[ta2too]

Agreed. I had the same questions and my attorney told me that usually any thing can be unraveled.

Just get good insurance, and plenty of it! It's the best thing you can do to shield you from liability.

[midlifeflyer]

1 hour ago, GeeBee said:

I don't have to work hard to find out who to sue with an LLC. An LLC is required by law to list with the State in which it is registered a physical address for an "agent for service". I simply go to that states corporations website, I find out who that is, serve them with a suit. Move for discovery (which is a given) where the agent for service has to disclose all the officers of the LLC and it's over. Worse an LLC with a sole asset, an airplane is prime bait for "piercing of the corporate veil". As one aviation attorney said to me, "I move through LLCs like a hot knife through butter". It is easy because with the LLC with an airplane as its asset is fundamentally under capitalized from the get go and not a going business concern (tax returns provided in discovery will prove that). Judge will think about two seconds on a motion to pierce. All of that is about 4 hours of lawyer time.

Unless the LLC holding the aircraft, rents it to you, you provide periodic rental payments, show a positive cash balance in the LLC's account, insure the aircraft as a rental and maintain it as a rental meaning 100 hour inspections your corporate veil is an illusion of protection.

You are right that it's not difficult to sue an LLC and find out who are the people behind it. But it's not always as easy to "pierce the corporate veil" as many people think. The the way I see many single-member or family-only LLCs work, most of the elements of piercing, which come down to, "the member didn't treat the LLC as a separate person, so why should we?" can be discovered right away. Co-ownership LLCs, which do provide some degree of protection to the member who is not flying and to the asset itself, are often just as bad. 

Except for the fact that I've been seeing it for about 50 years, I would find the amount of misinformation on this subject amazing. I actually had a client once who wanted an LLC for "liability" reasons but refused to do anything to treat it as one, not even something as basic as a separate checking account.  

[midlifeflyer]

1 hour ago, GeeBee said:

rental meaning 100 hour inspections

Just a point of information, 100 hour inspections are not required for rentals.

[GeeBee]

True that but if he holds the aircraft out for rental, is he going to let just anybody fly it solo or is he going to require an instructor? To meet the invincibility standard, he has to make the rental a rental to all comers but he can require an instructor which makes him subject to 91.409b.

[BrettD]

7 hours ago, GeeBee said:

I don't have to work hard to find out who to sue with an LLC. An LLC is required by law to list with the State in which it is registered a physical address for an "agent for service". I simply go to that states corporations website, I find out who that is, serve them with a suit. Move for discovery (which is a given) where the agent for service has to disclose all the officers of the LLC and it's over. Worse an LLC with a sole asset, an airplane is prime bait for "piercing of the corporate veil". As one aviation attorney said to me, "I move through LLCs like a hot knife through butter". It is easy because with the LLC with an airplane as its asset is fundamentally under capitalized from the get go and not a going business concern (tax returns provided in discovery will prove that). Judge will think about two seconds on a motion to pierce. All of that is about 4 hours of lawyer time.

Unless the LLC holding the aircraft, rents it to you, you provide periodic rental payments, show a positive cash balance in the LLC's account, insure the aircraft as a rental and maintain it as a rental meaning 100 hour inspections your corporate veil is an illusion of protection.

"I don't have to work hard to find out who to sue with an LLC."

Well, you are assuming you know that an LLC exists. If someone is suing you they aren't going to understand that you have LLCs, what LLCs you hold, what states they are in, and what assets they hold. Once you know the LLC exists then you would need a court order which is going to waste a lot of time and cost money.

Again, simply taking basic steps so your assets aren't easily accessible public records that can be found in a 60 second query can be enough to stop lawsuits cold. If the LLC is properly managed in many cases it can be shielded from liability so that there is no way to easily get a judgement.

Edited April 19 by BrettD

[GeeBee]

14 minutes ago, BrettD said:

"I don't have to work hard to find out who to sue with an LLC."

Well, you are assuming you know that an LLC exists. If someone is suing you they aren't going to understand that you have LLCs, what LLCs you hold, what states they are in, and what assets they hold. Once you know the LLC exists then you would need a court order which is going to waste a lot of time and cost money.

Again, simply taking basic steps so your assets aren't easily accessible public records that can be found in a 60 second query can be enough to stop lawsuits cold. 

If they sue you personally you have to answer the suit unless you want default judgement against you. If you do answer the suit you have to say why you are the wrong defendant, and you have to tell the court who the correct defendant is if you have that knowledge (which you would if you are using the LLC as a shield). It is all down hill from there. I've been involved in litigation at various levels both personally and professionally and two that went to the SCOTUS. Your view of the bar is myopic at best. Let me summarize it in two words. "Billable hours". None is too much once the fight is joined.

[midlifeflyer]

6 hours ago, GeeBee said:

True that but if he holds the aircraft out for rental, is he going to let just anybody fly it solo or is he going to require an instructor? To meet the invincibility standard, he has to make the rental a rental to all comers but he can require an instructor which makes him subject to 91.409b.

That depends on a few things. I was in two of those relationships in which the checkout was not logged as dual or not charged for the instruction. In another, And why would an owner be required to offer the airplane to all comers?

[GeeBee]

 

5 hours ago, midlifeflyer said:

That depends on a few things. I was in two of those relationships in which the checkout was not logged as dual or not charged for the instruction. In another, And why would an owner be required to offer the airplane to all comers?

Only to prove his LLC was a going concern and not a sham

[midlifeflyer]

10 hours ago, GeeBee said:

 

Only to prove his LLC was a going concern and not a sham

Sorry I don’t  follow. Why does only having only one or a few customers make something a sham. Owners often place airplanes in LLCs as an addition layer when they enter a leaseback, a contract with a single entity (and the entity managing the airplane might well be a private club.  Corporations sometimes have a wholly-owned separately incorporated subdivision handling aviation for only the parent. They even have Part 135 private charter certificates.  

If you are saying that in many cases, individual owner place their airplanes in LLCs with no real benefit, I’ll agree. But my experience with LLCs of many types seems different than yours,

 

[GeeBee]

A leaseback is a going business concern. No problem there.  I have also set up dozens of captive 135 operations where the wholly owned LLC has primarily one customer, the owner of the LLC. I suggest to them, especially when facing tax audits they do an occasional charter to the public to legitimize the. situation. What I am saying is if you put your Part 91 airplane in an LLC, and the LLC generates no income, no periodic lease income no nothing that will be seen by the courts in any lawsuit as a sham and they will allow you to be sued. Worse is if you pay for the airplane expenses out of your pocket. 

[midlifeflyer]

We're seeing things differently.  For example, I would not suggest that a Part 135 private charter certificate holder do some public charters.

[GeeBee]

53 minutes ago, midlifeflyer said:

We're seeing things differently.  For example, I would not suggest that a Part 135 private charter certificate holder do some public charters.

You would if the person purchased the aircraft sales tax free under the provision that exempts air carrier aircraft, especially in CA and NY

[Max Clark]

On 4/16/2025 at 8:52 PM, BillySpace said:

Yep, I’ve got mine in a trust. It helps with estate planning, liability protection, and avoiding probate. Some folks skip it, but for me, it adds peace of mind. Definitely worth considering if you're planning long-term.

I have a living trust and a will, the will places all property not in the trust into the trust at death. Easy to manage this way without having to title everything.

[Max Clark]

When this topic comes up in conversation it tends to be centered around a) liability, and b) taxes.

On liability; if you own an airplane and are the pilot flying it and there is an incident LLC, Trust, Personal ownership, etc... isn't going to matter one lick. You are going to be sued personally as the operator. If you are leasing or renting the plane out as part of a business then absolutely, you need it in an LLC to provide the separation in the event of a liability claim. But people who are purchasing aircraft to lease them out already know this, that's not what we're usually talking about. Liability as the operator is why you need a good insurance policy that gives you proper coverage for your unique situation.

On taxes; some people think buying the plane via an LLC will help them avoid taxes, or to give additional tax benefits on their return. Heck this is what my CPA thought - except the structure he was proposing would have required a Part 135 charter operation and a commercial certificate. Sales and property taxes are treated differently depending on how you purchase and hold the property as well. You might think you are gaining an advantage when in fact you've just opened up a can of worms.

 

[GeeBee]

Yep, seen a lot of LLCs and Sub S part 135 operations where they only serve their owners. Tax man comes to audit for sales tax on the aircraft and finds the operation a sham operation because it has never served the public at large. Tax law exempts for "common carriage" and serving one customer, the owner does not meet that test. Tax man says "pay up" and then you got one big fight which I have never seen anybody win.