NFA/Gun Trust - AH May/June article

[JumboJVT]

In the May/June American Handgunner there is article about creating Revocable Trusts for guns. The author, a confessed non-attorney, urges the reader to create an "NFA" and/or "gun" Trust if that individual has any significant holdings in either category. In the article, the writer asserts that after creation of a Trust, and the assignment of NFA firearms to the Trust, that any assigned co-trustees can have free, ready and unrestricted access to the NFA items, including the transportation thereof.The writer seems to assert that the possession of an NFA item absent the presence of the registrant is OK, because the the item is "owned" by the Trust.

I see the definition of a "responsible person" under CFR 27(B)479.11 includes persons with the "... power or authority to direct the management and policies of the trust". Its always been my understanding that in a Revocable Trust, only the Grantor (or Settlor) - by definition, the registrant of the NFA item - has the authority to make decisions regarding the Trust, hence the revocable part. Co-Trustees only have the authority to execute the terms of the Trust upon the passing of the Grantor... at which time the assets of the Trust ascend to the beneficiaries (most often the co-Trustee's, but not necessarily), which the writer acknowledges requires an NFA transfer.

Irrespective of the other benefits of a Trust (primarily, no Probate) can co-Trustees really have legal, unfettered access to NFA items just by virtue of the items being owned by the Trust? The author also asserts that the Trust can buy NFA items without signoff from the Chief LEO. Really? My guess is that the author is conflating Revocable Trusts with other Trust types that have more stringent organizational requirements. What say those who are actually attorney's? Thank you for your time.

 

[Elkins45]

Trusts became popular for buying NFA items for a number of reasons. The ability for trustees to have access to the items was one of them.

FYI the requirement for CLEO sign off ended when 41F passed. Now you are required to notify but not required to get approval. Also, the time to establish a trust is before you acquire the items and not once you have a few. If you establish a trust after acquiring them you will have to pay the transfer tax all over again to transfer them to the trust.

 

[boom boom]

In the May/June American Handgunner there is article about creating Revocable Trusts for guns. The author, a confessed non-attorney, urges the reader to create an "NFA" and/or "gun" Trust if that individual has any significant holdings in either category. In the article, the writer asserts that after creation of a Trust, and the assignment of NFA firearms to the Trust, that any assigned co-trustees can have free, ready and unrestricted access to the NFA items, including the transportation thereof.The writer seems to assert that the possession of an NFA item absent the presence of the registrant is OK, because the the item is "owned" by the Trust.

I see the definition of a "responsible person" under CFR 27(B)479.11 includes persons with the "... power or authority to direct the management and policies of the trust". Its always been my understanding that in a Revocable Trust, only the Grantor (or Settlor) - by definition, the registrant of the NFA item - has the authority to make decisions regarding the Trust, hence the revocable part. Co-Trustees only have the authority to execute the terms of the Trust upon the passing of the Grantor... at which time the assets of the Trust ascend to the beneficiaries (most often the co-Trustee's, but not necessarily), which the writer acknowledges requires an NFA transfer.

Irrespective of the other benefits of a Trust (primarily, no Probate) can co-Trustees really have legal, unfettered access to NFA items just by virtue of the items being owned by the Trust? The author also asserts that the Trust can buy NFA items without signoff from the Chief LEO. Really? My guess is that the author is conflating Revocable Trusts with other Trust types that have more stringent organizational requirements. What say those who are actually attorney's? Thank you for your time.

You might want to read this directly from the horse's mouth--the ATF
https://www.atf.gov/rules-and-regul...-checks-responsible-persons-effective-july-13

For example, your definition of a responsible person is too narrow, ATF says,
"Who is a Responsible Person?
In the case of an unlicensed entity, including any trust, partnership, association, company (including any Limited Liability Company (LLC)), or corporation, any individual who possesses, directly or indirectly, the power or authority to direct the management and polices of the trust or entity to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust or legal entity.

In the case of a TRUST, those persons with the power or authority to direct the management and policies of the trust include any person who has the capability to exercise such power and possesses, directly or indirectly, the power or authority under any trust instrument, or under State law, to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust.

Examples of who may be considered a responsible person of a trust or legal entity include:

• Settlors/Grantors
• Trustees
• Partners
• Members
• Officers
• Board members
• Owners
• Beneficiaries – if said beneficiary has the capability to exercise any of the powers or authorities enumerated above."

The FAQ has links to the regulation etc. Sorry about the picture, it got picked up from the ATF when cutting and pasting.

 

[Frank Ettin]

///The writer seems to assert that the possession of an NFA item absent the presence of the registrant is OK, because the the item is "owned" by the Trust.....

Which helps illustrate the need to be careful about who one gets legal information from. A trust in not a legal entity. A trust does not, and can not, 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 (owns) 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":

1. The Free Dictionary:

   Trust
   
   A relationship created at the direction of an individual, in which one or more persons hold the individual's property subject to certain duties to use and protect it for the benefit of others.
   
   Individuals may control the distribution of their property during their lives or after their deaths through the use of a trust. There are many types of trusts and many purposes for their creation. A trust may be created for the financial benefit of the person creating the trust, a surviving spouse or minor children, or a charitable purpose. Though a variety of trusts are permitted by law, trust arrangements that are attempts to evade creditors or lawful responsibilities will be declared void by the courts.
   
   The law of trusts is voluminous and often complicated, but generally it is concerned with whether a trust has been created, whether it is a public or private trust, whether it is legal, and whether the trustee has lawfully managed the trust and trust property.
   
   Basic Concepts
   
   The person who creates the trust is the settlor. The person who holds the property for another's benefit is the trustee. The person who is benefited by the trust is the beneficiary, or cestui que trust. The property that comprises the trust is the trust res, corpus, principal, or subject matter. For example, a parent signs over certain stock to a bank to manage for a child, with instructions to give the dividend checks to him each year until he becomes 21 years of age, at which time he is to receive all the stock. The parent is the settlor, the bank is the trustee, the stock is the trust res, and the child is the beneficiary.
   
   A fiduciary relationship exists in the law of trusts whenever the settlor relies on the trustee and places special confidence in her. The trustee must act in Good Faith with strict honesty and due regard to protect and serve the interests of the beneficiaries. The trustee also has a fiduciary relationship with the beneficiaries of the trust.
   
   A trustee takes legal title to the trust res, which means that the trustee's interest in the property appears to be one of complete ownership and possession, but the trustee does not have the right to receive any benefits from the property. The right to benefit from the property, known as equitable title, belongs to the beneficiary.
   
   The terms of the trust are the duties and powers of the trustee and the rights of the beneficiary conferred by the settlor when he created the trust....

   
   
2. The Law Dictionary:

   ...An equitable or beneficial right or title to land or other property, held for the beneficiary by another person, in whom resides the legal title or ownership, recognized and enforced by courts of chancery. See Goodwin v. McMinn, 193 Pa. 046, 44 Atl. 1094, 74 Am. St. Rep. 703; Beers v. Lyon, 21 Conn. 613; Seymour v. Freer, 8 Wall. 202, 19 L. Ed. 300. An obligation arising out of a confidence reposed in the trustee or representative, who has the legal title to property conveyed to him, that he will faithfully apply the property according to the confidence reposed, or, in other words, according to the wishes of the grantor of the trust. 4 Kent Comm. 304; Willis, Trustees, 2; Beers v. Lyon, 21 Conn. 613; Thornburg v. Buck, 13 Ind. App. 446, 41 N. E. 85....

   
   
3. Nolo Press:

   ...A trust is an arrangement under which one person, called a trustee, holds legal title to property for another person, called a beneficiary. You can be the trustee of your own living trust, keeping full control over all property held in trust....

   
   
4. Wikipedia:

   In common law legal systems, a trust is a relationship whereby property is held by one party for the benefit of another. A trust is created by a settlor, who transfers some or all of his or her property to a trustee. The trustee holds that property for the trust's beneficiaries. Trusts have existed since Roman times and have become one of the most important innovations in property law....

 

[AlexanderA]

I might add that gun trusts are not a "one size fits all" solution. There are things to be said both for and against the creation of such trusts. And, above all, you should talk this over with a knowledgeable attorney rather than using a boilerplate trust instrument found on the Internet or provided by a gun store.

As an indication, I've owned NFA items for a long time and I do not have a trust. And that's not because of ignorance.

 

[JumboJVT]

Thank you Gentleman for the responses. No danger of me personally doing anything without the benefit of competent counsel.