An Overview of NFA Gun Trusts, by Patrick Stegall

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The last few years have seen the development of an interesting legal mechanism called the gun trust. Gun trusts use estate planning law to deal with, and in some cases legally circumvent, arcane and restrictive federal laws that regulate the use and possession of certain types of firearms. These federal statutes make up the National Firearms Act (NFA), a series of laws that require registration of guns such as machine guns, short barreled rifles and shotguns, and sound suppressors (aka silencers). They are often referred to as Title 2 weapons because they are regulated under Title 2 of the 1968 Gun Control Act. Many people mistakenly call them Class 3 weapons, but Class 3 refers to the dealers of these weapons, not the weapons themselves.

History of the National Firearms Act

The NFA was passed in 1934 in response to the gang violence of that time. It imposed a tax on certain firearms thought to contribute to the growing "gangster" crime problem, including machine guns, short barreled rifles and shotguns, and silencers. In an effort to discourage possession of these types of weapons, individuals were required to register them with the federal government and pay a tax stamp fee of $200. The NFA was amended in 1968 and again in 1986, but its basic provisions remain unchanged: national registration of certain weapons and payment of a $200 tax per weapon, or $5 for devices classified as Any Other Weapon. ("AOWs").

The NFA has strict requirements and carries stiff penalties for violations. Essentially, only a registered owner of an NFA weapon may be in possession of that weapon. Illegal possession of an NFA firearm carries a prison sentence of up to 10 years and/or a fine of up to $250,000. Be forewarned, “possession” can be a relative and arbitrary term in the eyes of the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF).

ATF Requirements

Title 2 weapons must be registered with the ATF through an extensive and lengthy application process. Whether you are purchasing a weapon from a Class 3 dealer or building your own (many people will make their own short barreled rifle out of an existing non-NFA weapon such as an AR-15-style rifle), you must first go through ATF to have it transferred to you. ATF requires that you fill out the appropriate form, affix a two-by-two inch photograph of yourself along with fingerprints, and have the application signed by your local chief law enforcement officer (CLEO) [this is the police chief inside of city limits or the county sheriff if you live outside of city limits.] The $200 must be included, and that is for each weapon. Once the application is approved you will receive notice and the weapon may then be transferred to you. The approval time may take anywhere from three to six months.

The Gun Trust

NFA gun trusts have become popular in recent years as an alternative to individual registration. The central idea behind a gun trust is that the trust itself is the registered owner for NFA purposes, and anyone listed in it as trustee may legally possess the NFA weapons as trust property. There are basically three types of individuals in a gun trust: grantor/settlor, trustee, and beneficiary.

The grantor, or settlor, is the person who sets up the trust. This is usually the individual who wants to register and own Title 2 weapons but also wants other people to be able to use and possess those weapons. The grantor will submit the application to ATF but instead of registering the weapon in their name, he or she will list the trust as the owner. Trustees are individuals who, along with the grantor, will hold the trust property for the beneficiary. Trustees may legally possess NFA weapons in the trust even though they are not listed on the application. Trustees must be at least 18 years old (federal law prohibits anyone under 18 from possessing NFA weapons, and anyone under 21 from purchasing NFA weapons from a Class 3 dealer) and not be otherwise prohibited from possessing firearms. Finally, the beneficiary is the individual who receives the trust property upon the death of the grantor. The grantor can list as many beneficiaries as he or she likes, and there is no age requirement under federal law to be a beneficiary. Thus minor children can be named beneficiaries, and should the grantor die before the beneficiary is of age to take possession a trustee can be designated to hold onto the trust property.

Advantages of a Gun Trust

Gun trusts can be set up to be very flexible. Most are established as a revocable trust, which means it can be changed by the grantor during his or her life. When the grantor dies the trust becomes irrevocable, and changes can no longer be made. With a revocable trust, the grantor may add or subtract individuals or weapons to and from the trust as necessary.

Another advantage is that a trust allows the grantor to legally bypass many ATF application requirements. Fingerprints, photographs, and CLEO signature are not required. Not only can this speed up the process, but it’s nice to be able to tell the government, “No, I don’t have to give you that information.”

Sometimes people will ask about setting up a corporation as the registered owner, but I think trusts are better. Trusts are generally private and do not require public filing (this may not be the case in every state so you should check with a local attorney on this). Corporations are public, do require filing, and also require annual maintenance fees and taxes. For these reasons, trusts are a better way to go.

Should I go the gun trust route?

It depends on your situation, but generally I recommend yes. The trust will be in effect for your life and longer, and with the strict laws that govern NFA weapons it is reassuring to know that you can plan for the distribution of the trust property. For instance, gun trusts are usually good for families. A husband can name his wife, and perhaps other close relatives, as trustees, and his children as beneficiaries. It really just depends on your situation and your long-term goals.

It also depends on where you live, and here I must include the obligatory disclaimer: NFA weapons are not legal in every state. If you are considering getting into the world of Title 2 guns, then please check your state laws. All the information I have given you in this article is based on federal law, but state law applies too and that may differ. I suggest contacting a gun trust attorney in your state to discuss your options.

Patrick Stegall is a Memphis, Tennessee lawyer. Part of his practice is concentrated on drafting NFA gun trusts for individuals and families in Tennessee. For more information please visit him online at Tennessee Gun Trust Lawyer, or e-mail him at pstegall@stegall-law.com.

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This page contains a single entry by Jim Rawles published on February 16, 2012 10:58 PM.

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