The National Firearms Act (NFA) was originally enacted in 1934 and amended in 1968 to impose a registration requirement and $200 tax on the making and transfer of various firearms. NFA Trusts can mitigate concerns owners may have related to transfer of these valuable firearms to the next generation.
NATIONAL FIREARMS ACTThe National Firearms Act (NFA) was originally enacted in 1934 and amended in 1968 imposes a registration requirement and $200 tax on the making and transfer of shotguns having barrels less than 18 inches and rifles with barrels less than 16 inches, machineguns, suppressors, and certain firearms described as "any other weapons," and destructive devices. NFA was enacted to curtail, if not prohibit ownership of NFA firearms. In today's dollars the 1934 tax is equivalent to $3,486.51 per transfer. The $200 making and transfer taxes on NFA firearms was severe and has not changed since 1934, although it was amended in 1968 to reduce the tax on "any other weapons" to $5. Although legal nationally, with restriction under the National Firearms Act, Suppressors have only been legal in Mississippi since July 1, 2000. Likewise state law in Alabama has allowed federally registered Short Barrel Shotguns and Short Barrel Rifles since 2010. Only one crime has been committed with a legally owned NFA Firearm since 1934 (by an off duty Dayton, Ohio Police Officer).
TRUST BACKGROUNDRevocable Trusts provide the same benefits that corporations do to purchasers of NFA Firearms. The NFA Trust, however, brings with it added benefits as it allows for more privacy than that of a corporate entity. Additionally, the cost of a trust can be much lower, generally, than a corporate entity which can cost anywhere between a few hundred dollars to several thousand dollars plus filing fees. An NFA trust is generally a one-time fee paid to an attorney who draws up the document. The cost is normally around six hundred dollars, but can increase due to complexity. A revocable trust is an excellent option if it is prepared by a competent attorney; however, trusts that are not set up properly to deal with the National Firearms Act (NFA) can result in serious repercussions including, but not limited to, criminal charges, fines and forfeiture of all weapons. The NFA revocable trust organizes who will maintain the firearms and for whose benefit they will be so maintained. It is imperative that the parties understand both federal and state firearms regulations as they relate to trust ownership of NFA firearms. After a NFA Revocable Trust is drawn up by an attorney, the transfer process is the same. The Trustee completing an ATF Form 4 or Form 1 along with a copy of the entire trust and the $200.00 transfer tax. After the trust purchases the weapon, the Trustee is under a fiduciary obligation to maintain all property within the trust for the benefit of the beneficiary as outlined within the trust. Under certain circumstances transfer of assets to an NFA trust may constitute an irrevocable gift which after the five year look back period is exempt from Medicaid Subrogation/ Reimbursement. In the context of a filing of bankruptcy, assets transferred to a trust may be exempt from recovery by the Bankruptcy Court after two years.
BENEFITS OF TRUST OWNERSHIPWhile there are many reasons that people choose to establish a trust for ownership and transfer of their NFA firearms the following are some of the most common reasons individual establish trusts. 1. NFA Trusts offer flexibility, convenience and peace of mind for advanced firearms collectors. 2. Multiple trustees may possess a Title II Firearm on behalf of the Trust. 3. Trust assets are private as the local Chief Law Enforcement Officer is not required to sign off on purchases by a Trustee on behalf of a Trust. 4. Trustees save time in preparation of the Form 4 and Form 1 application process because they do not have to go to the hassle of taking the time and expense involved in being fingerprinted and photographed for each form submitted to BATFE. 5. Trust owned property is not probated by the Chancery Courts that are all too often unfamiliar with Title II Firearms and the federal laws governing their ownership and transfer. 6. No additional paperwork must be completed to lawfully transfer a Title II firearm to a beneficiary/ trustee after a transferor dies. 7. Properly drafted trusts can prevent loss of trust assets due to possession by unauthorized individuals. 8. Trust assets may be protected from subrogation by Medicaid for nursing home bills and recovery by a Bankruptcy Court. 9. Trusts do not typically have annual filing fees. 10. Properly drafted trusts are less costly to form than a properly drafted corporation.