When could a short-term aircraft trust help with an aircraft transaction? How are they used to bridge gaps and provide temporary solutions for owners and manufacturers? Aircraft Guaranty Corp offers insights into this useful option…
When a US-registered aircraft sale is “closed,” its existing registration becomes invalid and the airplane must be reregistered by its new owner. There’s a problem when a new owner does not meet the qualifications to register the aircraft in their own name, however. An aircraft must be registered, and we know that the FAA has stringent requirements to qualify for US registration.
A short-term or interim trust permits non-US citizen buyers or sellers to complete the purchase of an N-registered aircraft. You can learn more about trusts in our earlier blog, What is an aircraft trust and how does it work? Short-term trusts can be set up rather quickly, so they’re a good solution for many purchase situations in the US.
Aircraft in Transition
Often an aircraft that is purchased by a foreign buyer must have work done in the US before it can be exported. It may require modifications to satisfy airworthiness requirements of another country. Or perhaps work is required on the airplane to meet US requirements so that it can be ferried to its new country.
Whatever the specific situation, aircraft registration is required. The buyer can’t register the aircraft if they are not a US citizen. The sold aircraft cannot keep its registration through the seller. Having no registration is not an option; the aircraft would not be able to leave the country.
The best – and perhaps the only – solution is to register the aircraft in trust. A trust company will work with the new owner to set up a registered trustee for the length of time needed to legally and safely get the aircraft to its new home country.
Aircraft Made by a Foreign Manufacturer
Many foreign aircraft manufacturers have facilities in the US. In this case, even when an aircraft is manufactured in the US, it is still owned by a foreign country. For this reason, the aircraft would not meet US registration requirements.
A short-term trust is used for an aircraft that is made in the US by a non-US citizen manufacturer or distributor. Non-US citizen aircraft manufacturers place the titles to their aircraft in trust so that it can be used as a demonstrator in the US or marketed to US or non-US purchasers.
Aircraft Repossessed or Stored
If an aircraft is repossessed by lenders who are not US citizens, it can be placed into a short-term trust so that it can remain on the FAA Registry. These airplanes are often stored in the desert and are maintained, repaired and modified in the US during this period of repossession and remarketing.
Obtaining or maintaining US registration is desirable in this scenario, because it proves that the aircraft will remain subject to high US maintenance standards.
This will uphold the value of the aircraft. Many lenders are trying to sell their aircraft to US buyers. Marketing an airplane with a US registration helps promote these sales.
Aircraft not Certificated by the Buyer’s Country
In some sales, an aircraft cannot be registered under the laws of the buyer’s country because it is a type not yet certificated by that country. Aircraft Guaranty’s client, Roger Harr, found himself in such a situation when he purchased his Cirrus in 2005 (read more in our interview with Roger: The Pilot Chronicles of Roger Harr).
In this case, a short-term trust may be the only way an FAA certified aircraft can be registered and operated by a non-US citizen.
Once the trust is created and the aircraft obtains a new FAA registration, the owner will be able to transport the airplane to its new home country.
This registration will allow the aircraft to pass through ramp checks and customs without any problems.
Buyers will have problems if they attempt to fly the airplane with the previous owner’s registration. This is a common problem that can be easily and inexpensively avoided with a trust.
Each of these situations requires a trust for a different length of time. In any of these mentioned situations, as well as in many others, a short-term trust facilitates the sale of new and used aircraft by US manufacturers, dealers, and owners to non-US citizens.
If an aircraft has gone off a registration, a black hole is created that nobody wants to deal with. Once this occurs, it’s very difficult to export an aircraft and obtain registration in another country.
This problem can be easily remedied – whether it’s needed for a few days or a few weeks, a short-term aircraft trust is often the best solution.
More information from https://agcorp.com