Discussion in 'NFA Firearms and Accessories' started by Manny, Jul 9, 2017.
Trusts submit photos, fingerprints, and CLEO notifications just like individuals now.
Individual registered items transfer tax free via a Form 5 to the deceased owner's survivors, so no hit there either.
You don't need to share the items, so that advantage to a trust doesn't help you.
While you can transfer tax free on a form 5, it is still a transfer and the item has to remain with the estate until the form is approved. Also, the form 5 allows it to transfer to lawful heirs, so if you want your buddy to get it, there has to be a will. With the trust, if your buddy is on the trust he can have the item right away with no transfer. So there is still some advantage there, but not a lot.
The last advantage to a trust would apply further down the road if you ever had interest in building your own NFA items. With a trust, you don't have to engrave your name on the item. Trusts can have cool names that look good engraved.
^ This, pretty much. For a while the benefits of a trust included no photos/fingerprints, no CLEO sign off when individuals had to, filing F1s on eForms, etc. None of that is true now. The one big benefit for some of us, myself included, is that other shooting members of the household can be listed as a trustee. But OP doesn't seem to care about that. As such, filing as an individual probably makes the most sense. And it is easy too.
I'd echo some of the others too: get it in the pipeline sooner rather than later. Wait times have been insane. Word is they're going to get better, but I wouldn't hold my breath.
This application of NFA trusts is new territory and not without controversy. Concerns of the appearance of tax evasion being one major risk, though sharing an item among trustees is functionally equivalent under the most constrictive interpretation of 'transfer'. Since one of trust's purpose is to privately maintain control over assets, no one knows if this mechanism has already been applied. The taxing authority may not like it, but has no established jurisdiction over state's trust laws. Similarly a corporate entity can freely move a registered item among officers and employees without requiring a transfer tax, subject to no other violations of law. Basically as long as something isn't specifically prohibited it should be allowed as lawful with the caveat that bureaucrats, politicians, and prosecutors themselves might freely operate anarchistic to the constraints of law and custom.
A trust provides options down stream that don't require permission or addional tax burdens of paperwork, time and money at least as currently tolerated by our 'public servants'. Whether that is worth the upfront consideration and cost is a matter of individual perception and temperament.
Let's see . . . estate planning, asset protection, avoiding probate, etc. (all the reasons trusts exist for other things besides guns) PLUS appointing someone who can make sure an unsophisticated heir does not become an accidental felon.
Do you have a legal citation for that? Case law? AG letter?
Or are you just spreading Internet speculation?
My attorney of 30 years, who drafted my trust, gave me this counsel when discussing who should be added to the trust. Feel free to do the research yourself which would have been a better choice than to impugn my character & accuse me of spreading rumor.
Hmmm. That was asking, not accusing.
Your response is interesting, though. I think you just answered the question.
On the matter of keeping NFA firearms as an asset, a trust has always met the definition of a "person" with regard to ownership under he definitions within the NFA. However, I understand ATF only started approving transfers to trusts beginning in the late '90s or early 2000s. And that was only because they were sued over the matter. (Full disclosure: I do not have the particulars, so this may just be internet speculation as well).
But if that were the case, there would have been no trust-owned NFA assets for 60-plus years, since the original Gun Control Act of 1934. One would think if there was really an issue, it would have come up during that 60-decade period. Or even later, since there are still thousands of personally-owned NFA firearms out there even now.
So, what makes more sense: it's really not an issue? Or we have a handful of lawyers who use scare tactics to sell legal services?
I've watched a whole cottage industry pop up in the past 10 years for NFA Gun Trusts, and it has been interesting. It made sense when people lived in areas where they couldn't get a CLEO signature. A trust is simpler and less expensive than forming a corporation.
But now that the CLEO sig is no longer needed, you still have a few lawyers scaring people into buying their services.
A trust is an estate-planning tool. Sooner or later, I suspect someone is going to get into a jam using one in ways that they are not really designed for. But that's okay. I'm sure that guy's trusted lawyer would be happy to represent him at that point as well, for his usual fee.
I suppose that is true as well. One would hope that their heirs would be civil enough to work through diving up who gets what without squabbling, but that's not always the case.
Not being a lawyer, I'm not sure what a trust would get you beyond what a properly drafted will would though. I'd assume that you'd pass the gun stuff on to the ones who have some clue about it in the first place and would know how to file a Form 5. Uncle Sam has been not-so-subtly reminding me every few years to make sure I have one and it's current, since everyone with any kind of assets ought to have one anyways.
No, that is not correct.
A trust is not, in fact or in law, a legal entity.
Under the Internal Revenue Code (Title 26 of the United States Code), the word "person" is defined to include, among other things, a trust, a partnership, an association and an estate (26 USC 7701(a)(1)).
However, just as in fact and in law a trust is not a legal entity (or person), nor are a partnership, an association (if unincorporated) or an estate.
Furthermore, the preface to the IRC definitions says:
So even in the IRC when the word "person" is used it doesn't necessarily include a trust, a partnership, an association, an estate, or a company. It all depends on the intent and context.
So Congress apparently decided that there might be times when, for the purposes of the effective administration of the tax laws, it might be convenient to lump various non-entities under the term "person", that does not necessarily change the fundamental legal reality that a trust, partnership, association, or estate is not a legal entity.
In other words, defining "person" to include a trust, a partnership, an association, a company and an estate is merely for the purposes of stylistic convenience. There may be times when, and situations in which, for the purposes of tax law the word "person" may be read to include a trust, a partnership, an association, a company or an estate. For example, certain rules relating to the deductibility of some business expenses, or the accounting for some business income, might apply whether the business is conducted by a natural person (i. e., a sole proprietorship), an artificial person (i. e., a corporation), a partnership, a trustee managing business property held by him pursuant to a trust, etc.
But lumping a trust, a partnership, an association, a company and an estate under the heading "person" doesn't change the legal nature or character of a trust, a partnership, an association, a company and an estate.
In a partnership, for example, the partners (or general partners) are personally liable for the debts of the business. A partnership might do business under a properly filed fictitious name giving the appearance of being a single entity, but the property, liabilities and debts trace back personally to the individual general partners.
Actually, there has never been a "trust owned" asset of any type during the hundreds of years that the Common Law has recognized the concept of a trust.
A trust in not, nor has it ever been, a legal entity. A trust does not, nor can it, own anything. People might talk in casual terms about a trust owning something or having assets, but that's only a shorthand for the more detailed, technical reality.
It's kind of like the old "I say clip, but you know I mean magazine" discussion. If one lawyer talks to another about the assets of a trust, they both know that what is really meant is the property owned by the trustee in trust. But to someone without the background to understand the shorthand, it appears that there is some legal entity called a "trust" which owns certain property. That illustrates how a casual misuse of terms can lead to a serious misunderstanding. As the Chinese say, "The first step toward wisdom is calling things by their right names."
The legal reality is that the trustee (a person -- natural or artificial (a corporation) as the case may be) holds legal title (owns) to the assets in trust, subject to the terms of the trust document, for the benefit of one or more beneficiaries. Let's look at some definitions of "trust":
The Free Dictionary:
The Law Dictionary:
You say a trust is not included in the definition of a "person". And then you post a reference that appears to say it is.
I don't dispute what you have posted. But it seems the only definition that matters in this case is the definition that the NFA law references/recognizes.
Similarly, the only opinion that really matters is the ATF's, and their lawyer's.
Say Joe Blow has a machine gun, which is registered to the Joe Blow Trust. Joe is the trustee. If you were to ask ATF who "owns" the gun, what would they say? Joe, or the Trust?
No, I did not say that a trust was not included in the definition of "person." I said a trust is not, in law or in fact, a legal entity. And that is correct. A trust can not own property. A trust can not sue or be sued in its own name. A trust does not do business in its own name. A trust is, under the law, merely a construct or device through which a person owns assets or property for the benefit of another.
The definition of the word "person" under the Internal Revenue Code (26 USC 7701(a)(1)) includes a trust (and a partnership, association, and estate):
That doesn't change the legal nature of a trust. That simply means whenever a tax statute uses the word "person", the rule or provision of the statute also applies to a trust (and a partnership, association, and estate), except:
The qualified (by the exception noted) inclusion of a trust within the definition of "person" does not, and can not, change the essential legal character of the trust concept. A trust doesn't become an entity or actual person because of that inclusion. It's merely a way of conveniently saying that when a tax provision applies to a person, except:
the tax provision also applies to a trust (and a partnership, association, and estate)
They'd say "Joe as trustee of the XXX Trust." More importantly, so would a court.
That is illustrated by this comment by the Third Circuit looking, in a different context, at the use of a trust as a device for the beneficial ownership of NFA weapons (Watson v. Lynch (Third Circuit, No. 15-2859, 2016), slip op. at 9):
And as the Third Circuit noted in Watson (slip op., at 6):
To clarify: While the Internal Revenue Code includes a trust (and a partnership, association, and estate) in the definition of "person", the Gun Control Act (at 18 USC 921(a)(1)) does not.
I was about to post a thread on a question much like this. I'm getting ready to send in my third Form 4, and I'm oscillating on whether or not to use my trust. Currently, one of my suppressors was transferred through a trust, and the other individually. Honestly the only reason I got the trust were murmers on the interweb suggesting that if your spouse had access to the safe your suppressor is in, she could potentially be charged with a felony. I didn't want to unintentionally make my wife into a criminal if I gave her the combo to my safe, or if I accidentally left my suopressor in my range bag in the reloading room, etc.
That said, I haven't been able to find any accounts of something like that happening to anyone at all online... And I'm wondering if it's really worth jumping through the extra hoops to do this next form 4 through the trust. Has anyone seen or heard of a case of accidental criminalization of a spouse, just because they were in the same house as a suppressor, or had access to it's storage area? I'm honestly the only one that will be shooting it, and I don't have any interest in lending it to friends or anything like that.
And I'm wondering if it's really worth jumping through the extra hoops to do this next form 4 through the trust.
Given that you have the trust, what extra hoops are there?
I haven't been able to find any accounts of something like that happening to anyone at all online...
That's not surprising. Suppose you do something that is clearly illegal - let's say you loan an individually owned suppressor to a friend. What are the odds they will get caught? Unless they do something bad with it, or their house is searched for some reason, no one will ever know.
Suppose letting your wife know the safe combination does amount to constructive possession - same argument, what does it take for her to get charged? Suppressors aren't all that common in the first place, people who own them legally are by definition pretty law abiding people, and so on. You'd need a very unusual set of facts for her to get charged.
My take is that, especially with the $25 trusts, why take any risk, but YMMV.
And of course, I want my better half to be able to take our suppressors to the range all on her own when I'm out of town or whatever.
ETA: (ooops, this edit was for a different thread, moved it)
First of all, I was out of line by calling you a part of animal anatomy. I was grumpy yesterday and shouldn't have posted and I apologize for that unnecessary comment.
Secondly, my attorney charged me lunch. He's been my closest friend since college (apart from my wife) and he refuses to charge me for things such as the trust. He advised me to take this into consideration when determining who to add to the trust, so there wasn't a financial benefit to him for this advice. Was he correct? I assume he was since practicing law is his livelihood and he certainly knows much more about it than me. Maybe he advised it out of an abundance of caution. Attorneys can be like that.
Lastly, I've never seen this as internet speculation. It was simply my experience. I'm not an attorney although I do play one on TV and I stayed at a HI Express last night.
Well in my case, I haven't used the trust in 3 years and have moved in the interim, so the mail to address is wrong. The NFA trust mill that wrote it charges $95 to send an amendment to change the trust address. I think I could just write an amendment myself, but I don't want to test that theory and find out that after a year of waiting for a form 4 I should have added extra witnesses, or another signature block or some such... Sending me to the back of the line.
Even if the amendment was all good, I then have to go get it notarized with a couple witnesses, along with the assignment letter for the new can. My wife has to go get pictures and fingerprints taken, complete responsible person forms and I have to figure out where all I have to send triplicate copies of everything. Seems like all this extra paperwork raises my chances for a mistake of some kind which could potentially torpedo the transfer.
What am I gaining for all this leg work over an individual transfer?
That's what I can't really figure out. My wife has no interest in shooting my suppressors and my son won't be old enough to be a trustee for 19 more years. When I die, my trust states that it is to be dissolved and the items disbursed to heirs, which I assume means form 5s, which I believe is what would happen with individually owned items anyway. Maybe I got the wrong trust the first time, but it just seems like now that Efile is permanently dead, it doesn't really do anything to justify using it again. Maybe I'm wrong though, I'd love to hear other opinions.
The NFA trust mill that wrote it charges $95 to send an amendment to change the trust address.
Uff da. FWIW, my trust, in it's 60 odd pages of verbiage, contains not a single address. I've moved, and had Form 1/4's approved after the move.
Hopefully, someday, some altruistic attorney will release something like the $25 trust into the public domain.
Re: your wife and photos/prints - IIUC, you have to submit photos/prints for each 'responsible party' as of the time between submittal and approval. So the idea behind the $25 per-item trust is that you submit your form 4, with your prints/photo, and your wife not listed as a trust beneficiary. When you get the approval, then you amend the trust to include the better half. Caveat: I haven't seen the text of the $25 trust. If someone would post a redacted copy that would be splendiferous.
Our bank will notarize things for customers for free, FWIW.
My trust has no address. My attorney has advised me that the trust has no address. But that's my trust. I don't know trust law, that's why I had an attorney draw it up for me. I don't try to tell people about their trusts, I only know mine.
As far as releasing a trust into the public domain, I believe those are out there. But IMHO, it's a good idea to have a trust drawn up by an attorney familiar with not only trust law, but the particulars of the law in your state and the NFA. It helps you when you have questions about the trust and about what you can and cannot do with it. As far as I know, none of the $95 online trusts will do that. It helps keep you from making stupid decisions based on the opinions of know-it-alls on the internet.
Separate names with a comma.