Why your Revocable Living Trust is not an appropriate substitute for an NFA Gun Trust
The basic revocable living trust (RLT) is not appropriate for use with NFA weapons. This article explains those shortcomings and why a properly drafted NFA trust is advisable.
Why is a trust used to purchase NFA weapons?The term "NFA weapons" is frequently used to described Title II weapons under the National Firearms Act. These weapons include suppressors, short barrel rifles (SBRs), short barrel shotguns and pre-1986 fully automatic weapons, among others. To obtain these weapons as an individual, you must apply to the BATFE for permission to receive the weapon, which process might take up to one year to complete. Your application must be signed by your Chief Law Enforcement Officer (CLEO) and must be accompanied by your fingerprints and photographs. Current BATFE regulations permit applicants to use a trust or other entity to apply for these weapons and such applications do not require the CLEO signature, fingerprints or photographs. In addition, trust applications can be efiled when purchasing the weapon through a licensed firearms dealer and such applications are taking as little as 3 months to approve, significantly shortening the wait time involved.
Why is an RLT not appropriate for NFA weapons?One of the main reasons people have resorted to using trusts for the purchase of NFA weapons is to share the use of these firearms with others, without committing a "felony transfer" of the weapons. The National Firearms Act states that any unapproved transfer of NFA weapons is a felony punishable by up to 10 years in prison and up to $250,000 in fines. The word "transfer" is defined to include the act of "loaning" the weapon to any other person, but there is no definition of what "loan" or "loaning" entails. Therefore, there is a fear that allowing anyone else to use your weapons, even possibly in your presence, could be interpreted as a loan of the weapon and subject you to criminal penalties. However, owning the weapon in a trust can avoid those issues, because there is a well established body of case law stating that trust beneficiaries have the right to the use and enjoyment of trust assets, and that trustees of a trust have the right of possession of trust assets. A properly drafted gun trust can take advantage of those principles to extend the use of NFA weapons to trust beneficiaries and co-trustees. Unfortunately, the typical RLT restricts the use of trust assets to the grantor and his/her immediate family. It also has no provisions to easily add or remove others as "lifetime beneficiaries" or co-trustees, so that they may have use or possession of trust assets. The RLT will likely also actually instruct a trustee to violate the law in handling NFA weapons after the grantor's death, by directing that trust assets be distributed to a beneficiary with no consideration of the necessity of prior ATF approval. I have personally seen applications rejected by the BATFE because the trust used to purchase the weapon was created by an online service, such as LegalZoom or RocketLawyer, and the reason given was "Trust may be insufficient. Please consult maker of trust for guidance." The applicant had waited approx. 9 months to receive this rejection notice and will now have to wait even more time (who knows how long) once he's resubmitted a revised trust document, all because he tried to do an RLT on the cheap.
How is a Gun Trust different?A competently drafted gun trust (sometimes called an NFA trust) is a special purpose trust set up to address these very shortcomings. It defines who can use trust assets and provides mechanisms to permit others to be added on or removed as "lifetime beneficiaries" or co-trustees. A gun trust also sets for the requirements necessary for others to enjoy these benefits and prohibits the use of NFA weapons by anyone prohibited by law (such as a felon, a substance abuser or someone convicted of misdemeanor domestic violence). A good gun trust is intended to serve as a comprehensive management system for NFA weapons, specifically instructing your successor trustees in how these weapons must be handled and the forms and procedures necessary to accomplish their legal transfer to your heirs after your death, so that no one gets crossways with the law. Finally, a gun trust will avoid the necessity for the judicial appointment of an Executor/Personal Representative following your death in order to carry out the transfer applications necessary to deliver the weapons to your heirs.