Aircraft in a Trust?

[BrettD]

5 hours ago, Max Clark said:

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.

 

For liability, yes if you are involved in a plane crash with a high dollar value lawsuit then it probably won't matter (unless you can convince the court that it is a separate business leasing entity). They are going to look up LLC and start researching it). LLCs do provide ability protection however (it's in the acronym!). It can create a firewall between assets. In some states even if you have a charging order you cannot force an LLC to disburse assets.

You can be sued for literally anything. Defamation of character, slips on your property, and minor car accidents. Having your assets segregated, complex, and difficult to locate will help you and can even prevent frivilous lawsuits. Ideally you own nothing and are a pauper on paper... no planes, real estate, stocks, bonds, vehicles, etc. You want to control assets, not actually own them personally. If assets are in your name, they are much easier to locate(simple 60 second search) and collect with a judgement.

 

Many states allow you to form an LLC and have no sales tax. You can buy the plane in an LLC and potentially not pay sales tax, but it depends regarding state law where you reside and if you plan to bring that plane to your home state. Many people are already doing this to buy supercars, saving tens of thousands of dollars in sales tax.

Edited April 20 by BrettD

[midlifeflyer]

13 hours ago, BrettD said:

For liability, yes if you are involved in a plane crash with a high dollar value lawsuit then it probably won't matter (unless you can convince the court that it is a separate business leasing entity

And if it is a separate business entity with good value, there’s always your share of it. that’s an asset as much as any investment account or stock ownership in a public company. (Well almost. State laws differ on this.)

The real point here is that when we personally cause an accident, we are personally liable. None of the devices we are discussing shield us from that liability. Rather, they are attempts to either (a) shield us from someone else’s liability, as in the aircraft co-ownership  LLC, or (b) shield our assets from being applied to that liability. 

We’ve been mostly discussing (b) asset protection here. And none, from the family revocable trust which provides pretty much none, to an offshore trust on the Isle of Man, which can provide a lot,  is perfect or will do the job the right way for everyone.  That’s why it a one-in-one issue with a professional. And why we buy insurance.