Owner Trust Structures Explained

An owner trust is a legal arrangement specifically designed to enable non-US citizens to register aircraft with the FAA. The trust holds legal title to the aircraft with a US citizen trustee, while the foreign owner (beneficiary) retains beneficial ownership and operational control.

This structure satisfies FAA citizenship requirements while providing the foreign owner with the practical benefits of aircraft ownership. The beneficiary can direct when and how the aircraft is used, managed, and ultimately sold.

Not all trustees are equal. The FAA maintains a list of approved owner trustees who have demonstrated understanding of aviation regulations and commitment to compliance. Major trustees include specialized aviation trust companies and banks with aviation departments.

When selecting a trustee, consider their experience with international owners, responsiveness to operational requests, fee structure, and ability to facilitate transactions. Some trustees offer additional services like insurance coordination and regulatory compliance support.

Trustee fees typically include an initial setup fee ($1,000-2,500) and annual maintenance fees ($2,500-7,500 depending on aircraft value). Some trustees charge additional fees for specific services like facilitating sales or handling FAA correspondence.

The trust agreement is the legal document that defines the relationship between trustee and beneficiary. Key provisions include the beneficiary's right to direct use of the aircraft, requirements for insurance coverage, procedures for sale or transfer, and termination conditions.

Standard trust agreements provided by approved trustees have been reviewed by the FAA and contain necessary provisions for compliance. Modifications should be reviewed carefully to ensure they don't compromise the trust's FAA eligibility.

The agreement typically grants the beneficiary exclusive operational control while the trustee retains certain oversight responsibilities related to regulatory compliance and safe operation.

When financing an aircraft held in trust, the lender will require specific provisions in the trust agreement. These typically include lender notification requirements, restrictions on trust modification without lender consent, and procedures in case of default.

Most aviation lenders have standard trust agreement addenda that address their requirements. The trustee, beneficiary, and lender work together to ensure the final documentation protects all parties' interests.

While the trust holds title, day-to-day operations are directed by the beneficiary. This includes selecting management companies, arranging maintenance, and directing where the aircraft is based and operated.

The trust structure doesn't limit where the aircraft can be operated. N-registered aircraft can fly internationally subject to standard international aviation requirements and any restrictions specific to the destination country.

Insurance policies must name both the trustee (as legal owner) and beneficiary appropriately. Aviation insurance brokers experienced with trust structures can ensure proper coverage.