Let’s Buy a Plane – the Ins and Outs of Aircraft Shared Ownership
Deloitte, one of the largest accounting firms in the world, says it best: “A joint ownership arrangement is an FAA-sanctioned agreement for more than one owner to share the cost of operating a single aircraft.” This is similar to fractional ownership, but usually more cost effective in the long run.
If you are looking to buy aircraft, we can help you out. Check out our guide to shared aircraft ownership.
Once you have decided to co-own an airplane, it is a good idea to draw up a list of obligations for all of the owners. It is likely that you are getting into this with someone you know very well, and trust. Still, it is valuable to list out who is doing exactly what straight from the onset. Miscommunication and small problems can blend together into large problems.
As the old saying goes, “Good fences make good neighbors.” Establishing who is doing what may seem like a chore, but understanding what everyone is bringing to the table is an important part of this process. One of the best things you can do is to write everything down. You need to explain who can use the plane, at what times, who is responsible for maintenance and repairs, and so much more.
For many people, co-ownership and partnership are interchangeable terms. In legal speak, there are clear differences. Partnership implies an association of two or more to co-own the plane for profit. It is slightly more complex that co-ownership. If you want to share ownership of your aircraft with another, then you are going to want to make sure that you are listed as a co-owner and not a partner. This may ease your tax burden.
Another legal distinction that you need to understand is the difference between tenancy in common and joint tenancy. As with many legal differences, the distinction is not apparent to those who are not familiar with the law. If you have a tenancy in common, should one of the owners perish, the ownership of the plane passes on to the decedent’s heirs. With a joint tenancy, ownership of the plane passes to the other owners when one owner perishes.
This is perhaps the biggest advantage of shared ownership. Planes are an investment, and co-ownership can help you defray many of the costs. Even if you are not splitting all of the costs evenly due to your agreement, what you are paying is usually less than the total cost of a plane. That applies to other costs as well, such as fuel and maintenance.
We would be remiss not to mention at least some negatives. Picking the right people is huge. Like a marriage, your shared ownership must be able to withstand everything, good and bad. Constant communication and honesty are crucial to owning a plane with someone else. This is a good time to reiterate that you need to make everyone’s rights and obligations very clear.
Another downside is the fact that you cannot just hop in your plane and fly any time you want. Usually, there is some sort of agreement on who can fly the plane at what times. If you can live with this, though, co-ownership often works itself out.