GUN TRUSTS: A WISE WAY TO PASS FIREARMS TO THE NEXT GENERATION
Introduction:
So, your Uncle Bob, located in Wyoming or Texas, is an ardent Second Amendment proponent with an arsenal of pistols, semi-automatic rifles and antique weapons which he very much wants your children to inherit and he has made you executor of his Will or trustee of his revocable trust and you live in California, indeed, San Francisco, California, where possession of many of the weapons is a crime. Your children are minors and still live with you.
In Wyoming it is perfectly legal to have such weapons, but part of Uncle Bob’s estate plan requires you to have your children become familiar with and trained in the safe use of the weapons for their own safety. Then Uncle Bob dies, you now control all those weapons, some of them very valuable, most of them illegal in your locale, and you don’t know what to do. You can’t take the weapons without violating the law…and then you find out there is a significant transfer tax due to various federal agencies for your receipt of the weapons which you don’t want but your fiduciary duty requires you to take. Meanwhile, your fifteen year old son is determined to get access to “his” guns.
Or you are Uncle Bob and want your nephews and nieces to have these weapons you have accumulated over the decades and to share your love of hunting, antique guns and the independence you feel access to weapons allows. You know your niece does not like them much and lives in a city which prohibits them, but you are thinking in terms of your great niece and great nephew who may very much share your interests in six or so years when adults. Indeed, your great nephew loves to hunt when visiting and has spent hours with you examining some of your antique weapons. Now you suddenly discover that it may be illegal for your appointed trustee, your niece, to accept them to transfer them to your heirs in San Francisco and that the cost in terms of registration is not minor. You are outraged that your freedom to gift what you consider valuable is somehow made difficult by a government that is not even in your jurisdiction.
But there may be a relatively simple solution which takes the heat off of the trustee or executor and allows you to transfer weapons in an efficient and legal manner. Called a “gun trust” it is a vehicle that may save feelings in the family while minimizing costs.
The Basic Concept:
A trust is simply an agreement between the “grantor or trustor,” who owns property, with the “trustee,” who takes the property for the benefit of a third party, the “beneficiary.” Often a single person can occupy two or more positions and the trustee has a fiduciary duty to protect the beneficiaries and comply with the terms of the trust. See our articles on Wills and Trusts.
Revocable Trusts let the Trustor alter them at will. They are commonly used in estate planning for the average family to avoid the costs and delays of probate in the courts. Irrevocable Trusts, once created, cannot be altered by the Trustor. The Trust, like a corporation or limited liability entity, is a separate legal and tax entity and the Trustor loses control of the assets but does have the initial right to instruct the Trustee as to what rules to follow in terms of assets located in the trust.
The key aspect that is of use for this analysis is that title to the assets passes to the irrevocable trust, not to the beneficiaries of the trust. It is the irrevocable trust that would own the guns and once placed into the trust, no title passes to a third party absent those instructions in the initial creation of the trust.
Gun owners may find use of a gun trust of great value. These trusts are used for firearms that are subject to strict federal and state regulations, though they may include other assets as well. Gun trusts can make it easier to comply with the Trustor’s instructions after the Trustor’s death and act to prevent surviving family members from inadvertently violating the law.
Weapons That May Need to be Held in Trust
Commonly, gun trusts are used for weapons that are regulated by two federal laws: the National Firearms Act of 1934 (NFA) and a revision of that law, Title II of the Gun Control Act of 1968. These weapons are often called “NFA” or “Title II firearms.” NFA weapons include machine guns, silencers, short-barreled rifles, and short-barreled shotguns (including sawed-off shotguns), grenades, and various other weapons. The classification of the weapons alters over time based on acts of Congress and various administrative agencies. While the Second Amendment protects the right to bear arms, the courts have ruled that “reasonable” restrictions may be placed on said arms to protect public safety. In that balancing act of individual liberty versus public safety, the possession of the weapons above and, over time, perhaps other weapons, are restricted
FA weapons must have a serial number and be registered with the federal Bureau of Alcohol, Tobacco, Firearms and Explosives, commonly called the ATF or BATF. Note that if you receive a weapon that is not already registered, you cannot then register it since it is illegal to own an unregistered weapon. You have already broken the law by possessing it! Such weapons can be possessed and used only by the registered owner. To transfer a registered firearm, the owner must get ATF approval and pay a $200 tax (lower for some items). Assuming a large collection, the expense can be truly substantial.
Other federal laws also affect NFA weapons. For example, since 1986 it has been illegal to manufacture machine guns, and only those manufactured before that date may be legally purchased. (Firearm Owners Protection Act.) State laws may further restrict NFA firearms as well.
Benefits of a Gun Trust
A gun trust can avoid some of the federal transfer requirements and accomplish other goals as well:
- A trust allows more than one person to possess and use the weapons held in trust. If you name more than one person as trustee, each trustee will have the right to possess or use the trust firearms and can make them available to beneficiaries in a safe and legal manner.
- It allows one to retain the gun in the trust even after the current owner’s death, avoiding the usual transfer requirements. If you created a trust and transferred firearms to it, you can arrange for the trust to stay in existence even after your death. The trustees and beneficiaries of the trust would have whatever rights you grant them in the terms of the trust. Because the firearm stays in the trust at your death, the transfer procedure is avoided. That means your heirs may not have to pay $200 transfer tax, file an ATF transfer form, receive permission from the local chief law enforcement officer (CLEO), and get fingerprinted and photographed.
- It may help the executor or trustee of your estate who is tasked with all the duties connected with probate or administering your estate. The executor or trustee is the fiduciary who has the duty to assemble your assets, pay your debts, and distribute as instructed in your will or trust and may not be familiar with the rules about ownership and possession of NFA and other weapons. The executor or trustee could end up violating criminal laws by transferring a weapon without going through the proper procedure, or, commonly, receiving the weapon or moving it to a state where it is prohibited, or distribute it to a person who is legally prohibited from owning it. Recall that the Gun Control Act makes it unlawful for certain persons to possess firearms. The law prohibits anyone who was ever convicted of a felony or of misdemeanor domestic violence, is prohibited by a restraining order from harassing an intimate partner, uses a controlled substance unlawfully, or is an illegal alien, to name just some of the restrictions. This requires your executor to take steps to determine whether a possible heir fits into any of those categories or lives in a state in which possession is unlawful. That process can be extremely stressful not only to the executor, but to the entire family. When firearms are in a trust, the executor is not involved; the trustee is in charge. You can name a trustee who is well-versed in state and federal gun laws and provide instructions in the trust instrument.
- The trust avoids probate. Because the firearms are held by a trust, they do not need to go through probate at your death. This not only saves probate and attorney fees but remains private. Probate is a public procedure in the courts of the state. An inventory of everything owned and its value is filed with the court and available for public inspection. Few gun owners wish to have the public at large aware of their possessions and their value.
- Avoids possible future restrictions on gun transfers. Although no such legislation has been proposed, some gun advocates fear that someday it will be illegal to leave certain firearms to inheritors or transfer them during life. They hope that holding the guns in trust will let them get around any limitations if they are enacted. This may or may not be true; often new laws do not become retroactive. It is unknown if any such law would be enacted or if it would be retroactive.
Creation of the Gun Trust
A gun trust is a different entity from the common revocable living trust, which is often used, like a will, to leave assets at death. A simple revocable living trust allows the trustee to transfer trust assets without going through probate court, which saves time and money after death and maintains privacy as to the transfer. See our article on Wills and Trusts. Such a revocable trust becomes irrevocable upon death and often terminates shortly after death, since the trust assets are then distributed to the beneficiaries outside the trust.
A gun trust, on the other hand, may have multiple trustees, some expert in guns, be intended to last for more than one generation, and will be drafted with an understanding of both existing state and federal weapons laws and possible future changes in the law. It is an irrevocable trust, thus title to the weapons goes to the trust, itself, not to the beneficiaries, and the transfer and registration fees may be minimized (though they are paid at the creation of the trust.) Essentially, since the trust owns the weapons, the beneficiaries receive the benefit of ownership without having transfer to their names.
It also allows selection of a trustee who may be versed both in weaponry and gun laws, can act as a mentor to the beneficiaries, and can adjust operation of the trust to conform to whatever new laws (or new jurisdictions) may apply.
There are downsides. It costs thousands to create. The transfers, once made, are not reversable nor are the terms of the trust. You create the structure carefully since it is irrevocable. It will have to file its own tax returns if there is income and the trustees may want to be paid for providing the service…or not. That said, it allows the trustor to carefully structure a multi-generational way to pass weapons to the following generations. If thought out well, it can save both time and trouble for the very people the trustor wishes to help.
As an example: set up a three-trustee trust. One is a family member, one a friend who knows guns and the law, and the third one of the beneficiaries. Require majority decisions and impose such restrictions as not moving the guns into certain states unless they change the laws and requiring beneficiaries to take training courses before they can use the weapons.
A trust can last decades, indeed, well over fifty years. Once created, it is as legally “real” as you are, just like a corporation or limited liability company. It must be created with thought out goals, appropriate personnel, and flexibility to adjust to changing times. It must not be created casually.
Ethos of the Gun Trust
Owning a weapon requires a degree of responsibility that is greater than most other assets and in passing such weapons to the next generation, care must be taken to ensure appropriate use and access not only in terms of safety but in terms of stringent regulations that are likely to become increasingly rigid over the decades. Owning such an asset imposes a degree of planning on the part of the owner that is unique and of utmost importance to the community-and the family.
It is a personal decision, of course, but to merely transfer such assets to another family member without carefully planning the method of transfer and the possible dangers inherent to the new owner does not conform to the high degree of care that ownership of weapons often requires.
In short, if you are a responsible gun owner, the creation of this type of trust may be one more example of the type of responsibility required to justify the ownership.