Many individuals or couples have a “traditional” revocable trust to provide asset management opportunities for minor or disabled beneficiaries, to save estate tax, or to avoid probate. A traditional revocable trust can hold any asset, including firearms. What is a “firearm trust” or a “gun trust” and what are its advantages?
A firearm or gun trust may hold Title I firearms, family heirlooms, hunting rifles and other types of long guns, as well as firearms covered by the National Firearms Act (“NFA”). A firearm trust establishes a trustee or trustees as the owner of the firearms. As set forth below, there are multiple benefits to holding firearms in a firearm trust, particularly for NFA firearms.
Benefit: If your firearms are transferred through a will, it is likely the transfer will occur through the public probate system. A trust is a totally private arrangement that allows you to pass your firearms to your beneficiaries without the intrusion and publicity of the probate system (note that a trust cannot avoid the required government registration of certain firearms if required by statute).
Benefit: A traditional trust or will does not usually contain the provisions necessary to comply with the requirements set forth in the NFA or state laws regarding who can own, possess, or transfer these or regular firearms. Transferring a firearm to fulfill a bequest could subject the executor or beneficiary to criminal penalties if not done properly. In addition, a firearm trust can provide for an alternate trustee if any trustee becomes a “disqualified person” that cannot possess a firearm and can give your successor trustee clear instructions on how to lawfully transfer and deliver your firearms to your beneficiaries if you die or become disabled.
Benefit: Possession of a weapon by a prohibited person, either actual or constructive, may be a punishable offense under federal law. Constructive possession is defined broadly and includes knowingly having the power at a given time to exercise dominion and control over an object, either directly or through others. In the event of a violation, any person, upon conviction, may be required to pay hefty fines, receive significant prison time, or both. Further, if an NFA firearm is involved in the violation, it is subject to seizure and forfeiture. If the firearms are held by a firearm trust, however, a “possession” violation may be avoided where multiple individuals desire to use the firearm because all of the trustees named in the trust may use or possess the firearm, as long as each trustee is a “qualified” person.
Benefit: Under the NFA, a $200 transfer tax must be paid on every transfer of an NFA firearm. The term transfer is broadly defined and includes “selling, assigning, pledging, leasing, loaning, giving away, or otherwise disposing of an NFA firearm.” Moreover, in addition to the payment of a transfer tax, before an NFA firearm can be transferred, a transfer form must be filed with the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“BATFE”) that is approved by the defined Chief Law Enforcement Officer (“CLEO”). The form must be accompanied by the fingerprints and photograph of the proposed transferee and approved by the BATFE. Finally, the NFA firearm must be registered to the new transferee in the National Firearms Registration and Transfer Record (“NFRTR”). By using a firearm trust designed to hold NFA firearms, qualifying individuals may be named as trustees of the trust, entitling multiple trustees to possess or use the NFA firearms without complying with the transfer requirements. Note, however, that there is a proposed rule change that would require photographs, fingerprints and the CLEO certificate from the “responsible person” of a trust.
Interest in firearm trusts has grown recently and while there are “generic” software or online documents providers that will provide you with a firearm trust, there may be significant risks involved with using such “off the shelf” documents. Please be aware that the BATFE has declared certain trusts to be invalid, thus invoking penalties that may include forfeiting the NFA firearm, hefty fines, and a prison
If you would like our assistance in reviewing your particular situation with the purchase and/or transfer of your firearms, please contact us.