Large-scale NFA Trusts for "diffuse" possession of firearms

[Bill_Rights]

PURPOSE: A legal method to make it practically impossible for any government agency to track a particular firearm to its actual physical location, even if the firearm is legally purchased, background-checked and, in some localities, registered. The further purpose is to avoid government confiscation of firearms. The premise is that governments may act illegally (as we see it now) or may act on flimsy, quickly issued laws, court orders or executive orders before those orders can be legally challenged and reversed, to seize firearms from law-abiding gun owners.

Buckle up for a little bit of a complicated explanation (but it's way simpler than your taxes).

I recently spoke with an attorney who specializes in NFA trusts to ask about the advantages of an NFA trust. All I really wanted to do is buy some suppressors for rifles. (By what stretch of the imagination are suppressors Class III "weapons"? - do not answer that; it is OT.)

Interestingly, I learned that as far as the BATFE is concerned, I can have any number of members of the trust as Trustees, any number of Beneficiaries of the trust and that neither category of people, whether Members/Trustees or Beneficiaries, need to be related to me or live in the same state. And the trust can hold any type of firearm, not just Class III items.

Normally, one considers that the main advantages of setting up an NFA trust relate to a) passing along firearms to beneficiaries after death and b) making it legal for trust members to possess, store, transport and use the items in the trust, rather than the situation with a single-owner NFA stamp holder wherein the stamp holder must be present wherever the Class III item is, unless the item is properly stored at the stamp holder's house/property.

But I reasoned that, if a Class III item or any firearm held in an NFA trust can legally be possessed, stored, transported and used by any member of the NFA Trust, and if basically anybody can be a member of the trust, then consider what can happen if the trust has 6, 8, a dozen or 100 members. The item in the trust could legally, physically be with or at the residence of any of the members of the NFA trust. If there we many items in the trust, including ordinary sporting and self-defense firearms, those items/firearms can legally be possessed by any of the trust members at any given time. No one outside the trust membership could figure out exactly where, physically, any particular firearm was located (except by very detailed, prolonged, costly surveillance and detective work). I consider this to be an advantage, a good thing. Maybe only one or two trust members would know which trust member is responsible for a particular firearm/item. The other trust members have no need to know, or notification may be delayed. So if a particular trust member was questioned about the location of a particular firearm, most of the time he/she could truthfully say they don't know. Another good thing.

Possession is nine tenths of the law. When it comes to firearms, possession is ten tenths of its worth and usefulness at any given time, especially a time of need. I am suggesting that thwarting a sudden confiscation of firearms by government is a hugely useful thing to do to preserve our Constitutional 2nd Amendment rights. Of course, any such law or order by which government might try to justify a gun grab is constitutionally illegal. But it might take weeks, months or years to reverse the wrongful law or order. During that time, which is better? You still have the firearm or it is somewhere in the possession of a government agency? I know which I prefer. And, when (if) the illegal gun grab gets sorted out and it is time for the government to return the seized guns, well golly, don't you know, the government "lost" them. Or gee, it wasn't properly stored and now it's all rusty - dang, it doesn't seem to function anymore! Oh gosh, it looks like the barrel is bent too - imagine that! Sorry about that....

As many people have said (see the first comment after this article for ex.), I don't trust a government that doesn't trust me with my firearms. The way our government is heading these days, I, for one, think it is time to start preparing. An NFA trust seems like a legal, sane, rational way to gain a lot of flexibility for the future. But it can't be done in a day.

QUESTIONS: Did I get any of the details about NFA trusts wrong? (I am a newbie, just starting to look into them.) Do you know of any readable, reliable explanation of the ins-and-outs of NFA trusts? Please link to them or tell me where to buy a copy. Worst case, where is the text of the law authorizing NFA trusts, and any court cases that modify it?

 

[Sam1911]

Might run into a bit of an issue with crossing state lines as one still has to file a Form 5320.20 to let the BATFE know (and obtain permission) to take that firearm from one state to another. So unless all of your trust members are in one state, there might be some reduced effectiveness of the "escape and evasions" aspect.

I would be more interested in this from the viewpoint of greatly diffused cost associated with purchasing very expensive Title II (they aren't "Class III") firearms. If 50 people are all members of a trust and each ponies up $400, they could buy a mighty nice M-16 which otherwise would cost one person $20,000. Of course, they have to share time on it somehow, but if the money is that much of an issue, they aren't likely to be able to blow that much ammo through it every month anyway.

...

However, for all that positive, there are some negatives. One that springs to mind is the matter of trusting each of 50 people to never do anything stupid or careless with that valuable piece of group property. Getting picked up one beer over the limit while driving back from the club? Getting into an argument with a spouse and someone calls the police? Heck, having a home invasion some night and end up with that weapon taken into police custody (maybe just as SOP, with others)? Heck, just some dumb accident that ends up with the receiver broken. Does the screw-up now owe the group $19,600 for their shares of the gun he lost?

 

[Telekinesis]

...and you have just enumerated precisely the reason why the ATF wants to make every member of the trust submit fingerprints and photos, and then make every new trustee submit to the same approval process before they can possess the weapons. Ok, maybe one of several reasons, but it isn't that difficult to understand why the ATF wouldn't like this idea. The rule is currently in the comment period and is set to become codified in early December.

I have heard of several examples of what you propose, though none as big as 100 people. Basically a group of people get together to make a "NFA club" of some sort and each hold stock in a corp (or are trustees of a trust) that owns the NFA weapons. Everyone pays dues or percentages of a new weapon that they want to put in the trust, and everyone has access to every NFA weapon owned by the trust/corp. Kind of like joint ownership of the weapons. Then some people want to get out, or others want to get in, and their names are added to the corp/trust and life goes on.

Eventually you could get to a point where none of the original corp/trust members are actually active, which might get you some ATF scrutiny. Not saying that they would charge you or anything, just that the ATF investigating you is in no one's best interest. And I'm sure that ATF would give some extra scrutiny to a trust with a bunch of names on it on the first transfer.

Sam also brings up a good point about trusting a bunch of people with access to very valuable (and regulated) weapons. I wouldn't want someone I don't trust having access to anything I own, much less something like a registered machine gun.

I am suggesting that thwarting a sudden confiscation of firearms by government is a hugely useful thing to do to preserve our Constitutional 2nd Amendment rights.

Might I suggest that if you're seriously worried about gun confiscation, NFA weapons are not for you.

By the way, "Class 3" is a tax designation for a dealer in NFA items. Title 2 is the accurate description of the weapon type.

QUESTIONS: Did I get any of the details about NFA trusts wrong?

Technically speaking, you are correct in that a trust can have as many people as you want on it, and it would be legal for all the trustees to possess the assets of the trust.

Practically speaking, the ATF has a certain "seat of the pants" way of dealing with things they don't like (shoe string machine gun, atkins accelerator, open bolt semi-autos, etc) and you don't want to be caught on the wrong side of that.

 

[AlexanderA]

Interesting idea, but ..... as a practical matter, it's "too clever by half." The government would find a way to set such a trust aside, as a sham to avoid taxes and gun regulations. For example, the "sovereign citizens" movement has gotten exactly nowhere in challenging the tax system.

Besides that, if you had 100 "owners" of a gun, they'd soon start squabbling among themselves over who should have possession of the gun, and the scheme would fall apart. Sort of like the communist concept of property -- if everybody owns it, nobody owns it.

 

[Bartholomew Roberts]

The problem with such a system wouldn't be the government but human nature. A trustee typically has considerable discretion with trust property. You could buy a $20,000 M16 and put it in the trust and a fellow trustee could legally sell it for $10,000 the next day. Your only recourse would be a civil suit - and if you put enough restrictions on it to make that kind of thing unlikely and then add 100 people - there is a high probability you will get litigation out of that amongst the trustees - and that is before we get into duties to beneficiaries or how a trust makes decisions with 100 trustees.

Frankly, I'd be a lot more concerned about someone within a 100 person trust taking advantage of other members (or getting crossways with Uncle Sam and bringing attetion to everyone else in the trust) long before I was worried about confiscation.

 

[Zoogster]

Involving dozens of people with legal documents dealing with assets worth thousands of dollars has a high probability of resulting in some members disliking something in the future and bringing forth legal challenges.
They have a lawyer file paperwork or motions that results in you having a lawyer respond or file others. Lawyers will assure clients and encourage them to take more action.
Pretty soon everyone loses lots of money, the lawyers of all sides win and maybe some of the trustees come out less losers than others.

It does not matter if the trust is done perfectly, the legal challenges can still result in legal fees. Legal fees and lawyers can quickly amount to many thousands of dollars.



That said I know of aircraft purchased in similar ways.
Owned by individuals or companies that themselves could have never afforded a private jet, but can afford to own one as a group.
These are items that cost more than NFA items.


You also need insurance against various possible mishaps.
Being a gun confiscation while being used or misused or confiscated while in the possession of a member is an issue as well.

 

[Arizona_Mike]

The origional NFA declared such weapons could be owned by "a partnership, company, association, or corporation, as well as a natural person". What you are proposing sounds like a partnership or association to me!

I work for a company with over 100,000 employees.
One of my coworkers is part of a timeshare that ownes 2 Cesna 182s and has a mechanic on the payroll.

Mike

PS: Trusts were invented in the 1500s as a mechanism to possess land without having title to it which shielded the land from creditors, and avoided the taxes, and more importantly the fuedal obligations that came with title. They have been "too clever by half" since the very beginning. This is how the game is played

 

[Frank Ettin]

Any time one combines valuable property with any multiparty form of ownership, like a trust, a partnership or a corporation, there is the potential for significant legal and tax complications and various disputes among the parties regarding use and control. These can be very complex from both a legal and social perspective.

 

[Bill_Rights]

First, Sam and others, thank you for the correction about my erroneous "Class III" versus the correct "Title II".

Second, as I said in my OP, I am only marginally interested in an NFA trust as a way to get access to Title II weapons, such as fully automatic rifles and such. I said that I got involved with an NFA trust lawyer because I simply wanted to buy some suppressors. Maybe a sawed-off shotgun would come in handy for home defense (as an aside, as a boy, we had a neighbor who would loan us his sawed-off 410 single-shot shotgun with a bastardized carved pistol grip to take with us into the swamps in summer for chasing off and occasionally killing cotton mouth water moccasins.) But generally, I have no interest in Title II firearms, per se. (Well, OK; they would be fun, but I am not in a funny mood about our government just now...)

The main point of my OP was about using NFA trusts as a vehicle in which to hold non-Title II firearms. I mean just regular hunting, target shooting and personal-/home-defense firearms. (In that case, Sam, I don't think Trust members need to submit a Form 5320.20 to the BATFE before taking a non-Title II firearm across state lines, right?)

I am still sort of processing the comments made by others not addressed here. Thank you!

 

[Frank Ettin]

...The main point of my OP was about using NFA trusts as a vehicle in which to hold non-Title II firearms...

NFA trusts have been somewhat popular for holding Title II firearms because, at least up to now, they can help streamline some NFA compliance. However, the ATF has proposed some regulatory changes which might affect that.

And beyond that, as mentioned, various forms of multiple ownership will have an assortment of legal and/or social advantages and disadvantages. Whether or another arrangement might be suitable will depend on one's particular goals, who might be involved, and state, federal and tax laws.

A discussion here can not (1) be a useful treatise on trust law in general; or (2) serve as a substitute for someone discussing his particular needs with qualified legal counsel.

 

[Grump]

Thus, the importance of choosing trustees of ANY legal entity is obvious from the root word of "trustee":

TRUST.

Like the old dude said to Indiana Jones, "Choose wisely."

For models of how such arrangements can work, and the human dynamics that can but certainly don't always de-rail them, just look to the aircraft joint ownership arrangements. I first heard about them from a doctor at a medical practice where I tried to do marketing and PR in between MD egos and various types of sniping amongst the players.

Mandating mediation or arbitration and forbidding court action as much as possible *can* help, especially if the parties honor those parts of the agreement. Just remember that any idiot with written papers and a filing fee can open the doors of the courthouse, without regard for the merits of their "case".

But since that is also true of any business venture and those go forward all the time with little or no inter-partner litigation, my bottom line is that it's a good idea. This is NOT the first time I've heard such a proposal, and that's a clue to the thoughtful and perceptive.

 

[ChaoSS]

You make me wonder about something.

What if me and my dad, let's say, who lives in another state, formed a trust. Then, if one of us bought a gun, in the name of the trust, could we then "transfer" it to the other person, still keeping it in the name of the trust? Seems like a work around to certain transfer laws and straw purchase laws.

Which means, there are probably laws against it.

 

[Frank Ettin]

...What if me and my dad, let's say, who lives in another state, formed a trust. Then, if one of us bought a gun, in the name of the trust, could we then "transfer" it to the other person, still keeping it in the name of the trust? Seems like a work around to certain transfer laws and straw purchase laws...

Probably not. A "transfer" includes a change in possession, not necessarily just ownership. The federal law relating to interstate transfers of firearms apply to changes in possession even in the absence of a change in ownership.

 

[ChaoSS]

Probably not. A "transfer" includes a change in possession, not necessarily just ownership. The federal law relating to interstate transfers of firearms apply to changes in possession even in the absence of a change in ownership.

Fair enough. Perhaps if we both lived in the same state, assuming the SC case goes the wrong way, this could allow for certain things, although most people probably don't do that sort of thing often enough to make it worthwhile.

 

[Arizona_Mike]

Probably not. A "transfer" includes a change in possession, not necessarily just ownership. The federal law relating to interstate transfers of firearms apply to changes in possession even in the absence of a change in ownership.

I suspect this is incorrect but I'd like to hear for some of the lawyers who post here. Do corporations do Form 4473's when they assign use of Title I weapons? I don't think so.

Mike

 

[Sam1911]

I suspect this is incorrect but I'd like to hear for some of the lawyers who post here.

(Pssst... Frank IS one of the lawyers that posts here!)

 

[rbernie]

I'm pretty sure that one local shop offers an option to become a trustee of a single large trust (only Texas members, as far as I know) as a means of facilitating their can sales. This makes purchasing a can really easy - no separate trust need be formed and no CLEO signoffs are needed for the consumer to walk out with a can - they simply become a trustee and their can becomes property of the trust. The downside of this approach, from a consumers' perspective, would seem to be that all trust property becomes technically available to all trustees. In actual practice, it's simply being used by folk as a means to buy a can for their 22LR pistol and nobody is actually investing significantly more than anyone else in terms of trust property.

I suspect that the viability of this approach would diminish as the value of the property put into the trust becomes more and more unequal between trustees. But until then, the trust has property numbering in the hundreds and a relatively equal number of trustees geographically dispersed across Texas.

 

[Arizona_Mike]

(Pssst... Frank IS one of the lawyers that posts here!)

Fair enough, but I think this happens all the time in trusts and corporations with no paperwork.

For Example:
http://blog.princelaw.com/2011/01/12/gun-nfa-trust-frequently-asked-questions/

10. May a trustee reside in a different state? Yes, a trustee may reside in a different state; however, the firearm cannot be taken out of the state where registered without the trustee having filed and received an approved application (BATFE Form 5320.20) to temporarily transport the firearm outside of the registered state.

Of course the form is not needed for silencers or AOWs. Is there any reason that a 4473 would be needed for an NFA item or Title 1 firearm that everyone has overlooked?

This article talks about perpetual or 90-year trusts to allow future "non-transfers" after transfers are banned: http://rkmerting.com/placing-regular-firearms-into-a-nfa-trust/

This article talks about putting Title 1 firearms in a trust for similar reasons and the ablity to truthfully deny "owning any firearms": http://www.survivalblog.com/2013/06...21st-century-by-attorney-terry-e-hogwood.html

Every article I have linked to is written by an attorney.

Mike

 

[Frank Ettin]

(Pssst... Frank IS one of the lawyers that posts here!)

Fair enough, but I think this happens all the time in trusts and corporations with no paperwork.

Why do you think that?

For Example:
http://blog.princelaw.com/2011/01/12/gun-nfa-trust-frequently-asked-questions/

10. May a trustee reside in a different state? Yes, a trustee may reside in a different state; however, the firearm cannot be taken out of the state where registered without the trustee having filed and received an approved application (BATFE Form 5320.20) to temporarily transport the firearm outside of the registered state.

Of course the form is not needed for silencers or AOWs. Is there any reason that a 4473 would be needed for an NFA item or Title 1 firearm that everyone has overlooked?

But what does that have to do with a person who is a resident of one State giving possession of a Title I firearm to a person who is a resident of another State.

See 18 USC 922(a)(3), 18 USC 922(a)(5) and 18 USC 922(b)(3):

18 U.S.C. 922. Unlawful acts

(a) It shall be unlawful—
...

(3) for any person, other than a licensed importer, licensed manufacturer, licensed dealer, or licensed collector to transport into or receive in the State where he resides (or if the person is a corporation or other business entity, the State where it maintains a place of business) any firearm purchased or otherwise obtained by such person outside that State, except that this paragraph

(A) shall not preclude any person who lawfully acquires a firearm by bequest or intestate succession in a State other than his State of residence from transporting the firearm into or receiving it in that State, if it is lawful for such person to purchase or possess such firearm in that State,

(B) shall not apply to the transportation or receipt of a firearm obtained in conformity with subsection (b)(3) of this section, and (C) shall not apply to the transportation of any firearm acquired in any State prior to the effective date of this chapter;​

...

(5) for any person (other than a licensed importer, licensed manufacturer, licensed dealer, or licensed collector) to transfer, sell, trade, give, transport, or deliver any firearm to any person (other than a licensed importer, licensed manufacturer, licensed dealer, or licensed collector) who the transferor knows or has reasonable cause to believe does not reside in (or if the person is a corporation or other business entity, does not maintain a place of business in) the State in which the transferor resides; except that this paragraph shall not apply to

(A) the transfer, transportation, or delivery of a firearm made to carry out a bequest of a firearm to, or an acquisition by intestate succession of a firearm by, a person who is permitted to acquire or possess a firearm under the laws of the State of his residence, and

(B) the loan or rental of a firearm to any person for temporary use for lawful sporting purposes;​

....

(b) It shall be unlawful for any licensed importer, licensed manufacturer, licensed dealer, or licensed collector to sell or deliver --
...

(3) any firearm to any person who the licensee knows or has reasonable cause to believe does not reside in (or if the person is a corporation or other business entity, does not maintain a place of business in) the State in which the licensee's place of business is located, except that this paragraph

(A) shall not apply to the sale or delivery of any rifle or shotgun to a resident of a State other than a State in which the licensee's place of business is located if the transferee meets in person with the transferor to accomplish the transfer, and the sale, delivery, and receipt fully comply with the legal conditions of sale in both such States (and any licensed manufacturer, importer or dealer shall be presumed, for purposes of this subparagraph, in the absence of evidence to the contrary, to have had actual knowledge of the State laws and published ordinances of both States), and

(B) shall not apply to the loan or rental of a firearm to any person for temporary use for lawful sporting purposes;​

...

 

[Arizona_Mike]

Does this imply that rules are stricter for Title I firearms than Title II firearms? I thought NFA transfers to a trust by an FFL required a form 4473.

This seems to go pretty directly to my question: http://www.guntrustlawyer.com/2012/05/how-do-i-ship-nfa-firearms-to.html

Mike

 

[Frank Ettin]

Does this imply that rules are stricter for Title I firearms than Title II firearms? I thought NFA transfers to a trust by an FFL required a form 4473.

This seems to go pretty directly to my question: http://www.guntrustlawyer.com/2012/05/how-do-i-ship-nfa-firearms-to.html

There are certain, but different, formalities required in either case. Whether one set of formalities is "stricter" than another is essentially a value judgment.

Note that with a Title II item (whether a firearm or not) shipping it to a co-trustee in another State requires the specific, prior approval of ATF.

 

[medalguy]

I'd like to mention that one of your listed goals in forming a trust was to pass a firearm to a beneficiary after your death. In fact, after death of an individual owner, all that is required is a tax-free Form 5 filed, and the firearm passes to any beneficiary named in your will who is not a prohibited person. No trust is required, and I don't think there is any advantage at all in using a trust for this purpose.

 

[Frank Ettin]

I'd like to mention that one of your listed goals in forming a trust was to pass a firearm to a beneficiary after your death. In fact, after death of an individual owner, all that is required is a tax-free Form 5 filed, and the firearm passes to any beneficiary named in your will who is not a prohibited person....

That's good information.

However, the OP was specifically interested in using a trust for Title I firearms. Also, a primary use of a trust in estate planning is to avoid having to probate a will. The process of probate of a will can be time consuming, cumbersome and expensive.

 

[tepin]

Like others have said, for NFA items you have to inform the ATF when the location of the device moves and designate a "temporary" or "permanent" move. By doing this you essentially are disclosing your location of arms and defeat the original purpose. Some have suggested a Trust for NFA items and a Trust for non-NFA items.

I have actually given this topic some thought over the last couple years and I have come to the conclusion that the best a person can probably do is to assign their firearms to a Trust, open a safe deposit box at the bank in the name of the Trust and store your weapons there and mail your key and trust documentation to someone you trust - out of state. Because if the key or paperwork is discovered during a raid, they'll get to the bank next.

Now, the bank box thing breaks down with SOME (most) NFA items like suppressors, machine guns, etc... and here is what I mean:

When I applied for my SBR stamp (which I received) I first built a pistol from a stripped lower AR15 receiver. When I received my stamp I completed the build by adding a stock to the buffer tube. This is the only NFA item I own and with the crazy stuff going on right now, I don't plan to do anymore NFA items. Currently my SBR and all Title I firearms are in Trust.
In my situation with regard to the bank box scenario... According to the ATF, if I remove the stock from my SBR or replace the 10.5" upper with a 16" upper, the SBR is no longer under the purview of the NFA, meaning the firearm is no longer Title II but is now a Title I. Returning the SBR to Title I negates the need to notify the ATF as to the guns location (my home to my bank). If the change is permanent, the ATF would "like" to be notified but it isnt a legal requirement.

This obviously wouldn't work for suppressors, machineguns or really any non-modular firearm.

Having 2 homes in 2 states probably would matter either because in a raid, both homes would likely get hit at the same time. Leaving guns with friends or family in the same state may not be ideal either. Maybe this is why folks have been burying guns in the ground for centuries.

 

[Arizona_Mike]

A 5320.20 is required for a SBR, SBS, MG, and DD. Not required for an AOW or silencer.

Mike