What is a gun trust and why do you need one?
In 1934, the National Firearms Act (NFA) was enacted. Congress enacted the NFA as an exercise of its authority to tax. However, the true purpose of the NFA was to curtail transactions of NFA firearms. Congress was trying to discourage or eliminate transactions in firearms that were used in gangland crimes. Therefore, they enacted a $200 making and transfer tax on most NFA firearms. The $200 tax has not changed since 1934.
Title II of the Gun Control Act (GCA) of 1968 amended the NFA as follows: (i) the requirement that the possessors of unregistered firearms must register it; (ii) prohibited the use of any information from an NFA application or registration as evidence against the person in a criminal proceeding with respect to a violation of law occurring prior to or concurrently with the filing of the application or registration; and (iii) amended the NFA definitions of “firearm” by adding “destructive devices” and expanding the definition of “machine gun.”
In 1986, Firearm Owners’ Protection Act amended the NFA’s definition of “silencer” to include combinations of parts for silencers and parts intended for use assembling or building the silencer. It also amended the GCA to prohibit the transfer or possession of machine guns. There were some exceptions made to the transfer of machine guns to, or possession of machine guns by, government agencies, and those lawfully possessed before the effective date of the prohibition, May 19, 1986.
You might ask yourself, exactly what kind of NSA Firearm and devices am I allowed to own. Here in the state of Utah, residents are allowed to use and possess Silencers, Short-Barreled Rifles, Short-Barreled Shotguns, Machine guns that were manufactured on or before May 19, 1986, Destructive Devices and any other weapons that are capable of being concealed on the person. Of course there are two ways to legally acquire these NFA firearms: (1) Transfer after approval by the ATF of a registered NFA firearm along with the $200 fee; and (2) obtaining prior approval from the ATF to make NFA Firearms.
By establishing a Gun Trust, you have created a type of trust designed to address issues that are unique to firearms. This will help you owning guns and the regulations involved in owning such guns. The gun trust helps distinguish the rights and duties of the parties to the gun trust, including the use, possession and transfer of the firearms. The Gun Trust establishes how the firearms are managed during your lifetime and in the event of your incapacity and upon your death. The Gun Trust can serve as a comprehensive estate plan for all our firearms that are assigned to or acquired by the Gun Trust.
There are obviously multiple benefits of a gun trust. A few of the most important benefits are as follows:
The NFA firearm registered to a gun trust can be used and possessed by more than one person. You can add or delete persons who are allowed to use and possess the firearms throughout their lifetime;
The NFA firearm registered to a gun trust passes to the beneficiaries of the gun trust outside of probate. If you do not have a gun trust, the firearms are included in the estate for probate and go through probate court. The executor would then have to prove to the ATF that the decedent intended to transfer the NFA firearm to that specific person; and
If your NFA firearms are owned by you as an individual and you become incompetent, your NFA firearms are subject to confiscation immediately. However, if the NFA firearms are held in the gun trust, any co-trustee can take possession of the NFA firearms and hold them on your behalf. The ownership would be retained. If the NFA firearms were owned by a corporation, the corporation would be required to file federal income tax returns and state taxes, which are all public information. A gun trust is mostly private and is less intense and allows for flexibility.
Just a few fun facts about Gun Trust. Gun Trusts do not eliminate the ATF’s $200 transfer tax. You do not need a separate gun trust for each and every NFA firearm. There is no limit to the number of NFA firearms that may be held under your gun trust. It’s smarter not to have an inventory list or schedule with your Gun Trust. Having an inventory list or schedule increases the public knowledge of your NFA firearms. If you have a simple Gun Trust, with no inventory list or schedule list, you can simply use the gun trust to complete another purchase and you would not need to change the gun trust. The ATF tax stamp alone is evidence that the NFA firearm is owned by the Gun Trust. You can also assign non-NFA firearms to the gun trust.
There are three parties to a gun Trust: the Settlor, the trustees and the beneficiaries. The Settlor is the person who creates the trust and usually provides the funding and/or the firearms. The trustee is the person who is allowed to use and possess the firearms associated with the gun trust. The Settlor and the Trustee are usually the same person so that they can continue to use their NFA firearm. If the Settlor wants to lend the NFA firearm out to another adult, that adult should be added as a trustee. That Trustee must execute that they accept the appointment. This creates a fiduciary duty between the Trustee and the Settlor. Therefore the Trustee owes a fiduciary duty to the settlor and the beneficiaries of the trust to use and possess the NFA firearms in accordance with the trust agreement. One thing to keep in mind is that the Trustee must be 18 years of age. This is because by law, minors do not have the capacity to enter into a contract. Adding a Trustee could be as simply as having them execute a document “Appointment of Additional co-Trustee and Acceptance of Additional Co-Trustee”. Moving onward, a Beneficiary is the person who benefits after the death of the Settlor. It is the person who will inherit whatever property remains in the Gun Trust. If the beneficiary is underage, the Trustee will continue to operate the gun trust until they are old enough and mature enough to inherit the property associated with the Gun Trust. A beneficiary usually has no rights or duties during the life of the settlor. One big thing to note, beneficiaries cannot use or possess NFA firearms owned by the Gun Trust outside the presence of at least one of the trustees of the gun trust.
So I ask again, why a Gun Trust?
It is a simple way to allow for one ownership of multiple NFA firearms and allows for the use of those firearms with multiple trustees. It also limits the additional transfer/registration fees associated with the use of firearms. It is also a stream-lined process upon the death of the owner. It’s a simple solution to a potential headache. Contact us today at (385) 334-4030 or send an email to info@skvlegal.com to set up your free consultation.