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Other Assets
Airplanes*:
In General
How to Fund Aircraft
Notice to P&C Insurance Company
IMPORTANT NOTICE TO USERS:
The information contained in this legal bulletin is general in nature and
does
not constitute legal advice. Non-attorneys should consult
with a qualified estate planning attorney regarding any trust funding matter.
Issues of state law may contradict any information contained herein.
Accordingly, the information contained in this legal bulletin and on our web
site should not be relied upon without first confirming with a qualified
attorney that the legal requirements in a particular state are satisfied.
This web site, our products and services, and any accompanying resources
are
not intended to be a substitute for research, continuing legal education, or a
thorough knowledge of the law. In using any aspect of this
web site, the user, whether attorney or non-attorney, agrees to assume all
responsibility for the validity of the information contained herein.
In General: Funding airplanes presents some unique challenges
that are not present when funding other types of assets. Some legal commentaries have
suggested that because airplanes present an increased risk of liability (i.e. in
the event of a crash!), that they should not be funded directly into the trust
but rather be funded into some type of entity such as a nominee partnership or
limited liability company. Thus, before changing the ownership of an airplane, a decision first has to
be made whether to fund it directly into the trust or into a creditor-protected
entity that is titled in the name of the trust. The most conservative funding
approach would be to fund the airplane into a creditor-protected entity.
NOTE:
Because each client circumstance is different, we strongly recommend that
you consult an estate planning attorney for guidance in funding an
airplane.
When funding an airplane into either a trust or a
creditor-protected entity, the proper document to use is a Bill of Sale*.
The FAA
has privately indicated that they would prefer a Bill of Sale be utilized as
opposed to an Assignment, but did not provide a rationale for this preference.
Although in theory, both a Bill of Sale and an Assignment should accomplish the
same result, it would seem that the use of a Bill of Sale is the path of
least resistance.
*NOTE: To obtain a Bill of Sale, we recommend that you
contact your estate planning attorney to prepare
this legal document according to the unique circumstances of your
estate.
Under Federal Law all aircraft located in the United States
must be registered with the Federal Aviation Administration (FAA). 49 USCS 1403.
Since the procedure for registering and transferring ownership of aircraft is
"federal" in nature, state law is typically not involved.
How to Fund Aircraft: To transfer an aircraft to a living
trust send an instruction letter to the FAA requesting they change the
registration. Along with the cover letter,
include the following documents:
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Aircraft Bill of Sale
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Original Certificate of Registration
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New Aircraft Registration Application
(you must complete an original application; owners are required to retain
the "PINK COPY" of the registration in the aircraft until the
new Certificate of Registration is received.)
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Certified Copy of the Trust
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Affidavit certifying all trustees are U.S. Citizens or
legal residents and that all beneficiaries of the Trust are U.S. Citizens or
legal residents.
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$5.00 Aircraft Registration Fee
The FAA will then issue a new certificate of registration in
the name of the living trust or the creditor-protected entity.
Additional information and registration application
forms can be obtained from the FAA’s Aircraft Registration Branch at
(405) 954-3116 or Aircraft Owners and Pilots Association (AOPA) at
1-800-USA-AOPA.
Notice to P&C Insurance Company: Aircraft are often
covered by an insurance policy that protects against theft, loss or liability.
Typically these types of insurance policies, called property and casualty
policies, are purchased in the name of the client and provide insurance coverage
so long as the client owns the asset. Many legal commentaries have been concerned that
an insurance company may attempt to dishonor the policy if the asset is
transferred to their living trust. NOTE:
As a precautionary measure, your estate
planning attorney should consider sending a letter to the insurance company
requesting the trust to be named as an additional insured. Typically, there is no
additional premium for adding the trust as an additional insured. Consult
your estate planning attorney for help in modifying your property and casualty
insurance to accommodate ownership of the aircraft by your trust.
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