Gun Trusts

What is it?

In essence, a gun trust is a language specific trust that only holds Machineguns, Suppressors, Short-Barreled Rifles, Short-Barreled Shotguns, Destructive Devices, Any Other Weapons (referred to as Title II weapons under the National Firearms Act) and/or any other type of firearm, for the benefit of the beneficiary, while giving possessory and use rights to the trustee(s).


What is its Purpose?

To understand the purpose of a Gun Trust, one must understand the National Firearms Act (NFA of 1934), the Gun Control Act (GCA of 1968), and the Firearms Owners Protection Act (FOPA of 1986). Specifically, under these laws, an individual must register any Machinegun, Suppressors, Short-Barreled Rifle (SBR), Short-Barreled Shotgun (SBS), Destructive Device (DD), or Any Other Weapon (AOW).


The Bureau of Alcohol, Tobacco, Firearms and Explosives (BATFE, ATF, ATFE) currently allows the registration of NFA firearms, by an “person”, which is defined as: “A partnership, company, association, trust, estate, or corporation, as well as a natural person.”


An individual looking to transfer/register a NFA firearm needs to file an application (BATFE Form 1 for making a NFA firearm and BATFE Form 4 for transferring a NFA firearm), in duplicate, provide a registration tax, two sets of fingerprints, and two photographs. Furthermore, the individual must obtain the signature of a Chief Law Enforcement Officer (CLEO). While the application requires that the individual person obtain a CLEO signature, nothing mandates that a CLEO must sign an application for a NFA firearm, even if the applicant would pass the BATFE’s rigorous background check.


With many CLEOs refusing to sign for NFA firearms, even though both federal and state law allows for ownership, firearm enthusiasts sought different ways to acquire NFA firearms. In looking to the BATFE regulations, many saw corporations and trusts as viable alternatives, since they do not require a CLEO signature. With corporations requiring hefty startup costs, annual tax returns, a lack of privacy, and much more complexity in relation to a trust, many began to investigate the trust alternative.


And so was born the Gun Trust. For a trust, the application must be submitted in duplicate, with the appropriate tax fee but the trust is not required to submit fingerprints or photographs. More importantly, as stated above, a trust does not require a CLEO signature.



What benefit does it give?

As discussed above, one of the highlights of a gun trust is the ability to acquire NFA firearms without a CLEO signature. However, there are numerous other benefits that flow from a gun trust. For instance, with a properly drafted gun trust, the trustee(s) will have the ability to possess and use the firearms, without violating their obligations as trustees and fiduciaries. Moreover, and a reason that many families opt for a gun trust, is the fact that when an individual transfers/registers an NFA firearm, only that individual may possess and use that NFA firearm. However, with a gun trust, any trustee may possess the firearm. Hence, where a family sets up a gun trust, all family members over the age of 18 could be designated trustees; thus, enabling them to have possession of the firearm. Another reason for a gun trust is the ability to draft it such that the trust will continue to hold the firearms until the beneficiary comes of age or until the trustee determines that the beneficiary is of such maturity that he/she can assume the responsibilities of ownership.


Conclusion

These are but a few of the reasons that firearm enthusiasts are opting for gun trusts. However, a gun trust should not be drafted without sufficient knowledge of the NFA and BATFE’s rapidly changing, sometimes daily, decisions regarding trust applications. While it is likely that the BATFE will institute a slew of regulations regarding gun trusts and gun corporations, the gun trust will continue to provide substantial benefits over personal transfer/registration.