Firearms regulated by the National Firearms Act (“NFA”) have special licensing and regulatory requirements which restrict the transfer of firearms regulated by the NFA. As a result, gun trusts have emerged as a strategic tool to be used by gun owners to ensure that their collections are managed and transferred in compliance within the complex framework of federal, state, and local laws. The purpose of this article is to provide a high-level overview of gun trusts and their role in estate planning as a will lawyer has shared with us.
Understanding Gun Trusts
The NFA permits individuals, business entities such as LLC’s and nonprofit corporations, and trusts to own firearms such as machine guns, silencers or suppressors, short-barreled rifles or shotguns, and destructive devices.
Gun trusts differ from other types of trusts in that they allow multiple people to possess and have access to NFA firearms without breaking the law for the benefit of the trustees. Additionally, in most NFA trusts the grantor contributing the property expects to make all major decisions. The key purpose is typically to allow the grantor and trustees to legally borrow the firearms for sporting, recreational, and other purposes without regard to benefiting a beneficiary. All the trustee needs to take with him or her is the tax stamp and a copy of the trust.
Why Consider A Gun Trust
The NFA makes it illegal for any person other than the registered owner to possess an NFA firearm as our friends at Aptt Law LLC can share. Violation of this law is punishable by 10 years in prison plus a fine of up to $250,000.
A gun trust allows all those appointed as trustees to possess and have access to NFA firearms without fearing arrest or persecution for possession of an NFA firearm by someone other than the registered owner. Well drafted trust documents will educate trustees and beneficiaries about the legal requirements to the use and possession of the same. A gun trust provides continuity of control over NFA firearms by appointing other persons as trustees, this benefit is preserved as individuals pass away or decide they no longer want to serve as trustees.
Perhaps most importantly, grantors can separate firearms from the rest of their estate allowing their collection to be preserved as family heirlooms for future generations. A gun trust makes such transfers easy as approval from the government to change trustees is not needed. However, an application is still required to be approved prior to transferring firearms.
Important Legal Considerations
Improper setup or operation of a gun trust can result in felony convictions and substantial jail time. For example, while trustees can be removed and appointed easily, a Prohibit Person (as defined by the NFA) is prohibited from being a trustee.
Importantly, gun trusts do not exempt you from complying with your state’s firearms laws. For example, New York and California prohibit possession of Title II firearms that could otherwise be possessed pursuant to the NFA.
To mitigate some of these risks, no one other than a trustee should have possession of the NFA firearms, no transfer of an NFA firearm should be done prior to submitting the proper forms and getting approval, the grantor cannot be the sole settlor, trustee, and beneficiary, trustees should be trained on properly administering the trust, record keeping requirements, and the laws applicable to the firearms contained in the trust.
Because of the complex and intricate nature of gun trusts, creation is not a DIY task. Working with an estate planning attorney with a deep understanding of the legal framework is essential. If you are interested in learning more about how a gun trust can fit into your estate plan, a lawyer can help you navigate the complex landscape of firearm law to secure your legacy. Contact a lawyer near you today.