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It Will Soon Get Tougher To Create A Firearms Trust

More gun owners are expected to create legal trusts for certain firearms in anticipation of federal regulatory changes coming this summer that will make the registration process more onerous.

NFA gun trusts make it easier for gun owners to share their firearms legally with family members and others and transfer them to heirs without bureaucratic hurdles.

They also offer gun owners peace of mind that they will be able to own certain firearms and pass them down to family members even if gun laws change in the future.

But with heated debates about gun control and escalating sales of firearms, federal laws regulating gun trusts are about to get much tougher.

Current regulation only requires proof that a valid gun trust exists. The new rules, which take effect July 13, will require proof of a gun trust as well as background checks for each “responsible person” of the trust.

Given that all applications submitted before July 13 will be grandfathered to the existing rules, now is the time for gun owners to act quickly to create gun trusts before the rules change.

Gun trusts have become popular in recent years, especially with repeated attempts at legislation to prohibit the possession or sale of certain types of restricted firearms. Similar to a typical revocable trust, a gun trust gives the trustees the authority to use, possess and enjoy the property, and the trustees act as the fiduciaries for the beneficiaries.

Unlike a traditional revocable trust, however, a gun trust holds restricted firearms, and that means it has to comply with state and federal laws.
Gun trusts are used for weapons that are regulated by two federal laws that categorize machine guns, silencers, short-barreled rifles, short-barreled shotguns, grenades and other firearms as NFA firearms.

NFA weapons have to be registered with the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and can be possessed and used only by the registered owner. To transfer a registered firearm, the owner has to get ATF approval and pay up to $200 in transfer taxes for each transfer. The transfer also requires a signed approval from a chief local law enforcement official, which can be tricky in states such as Massachusetts, where officers routinely refuse to sign off on applications.

Until recently, trusts have enjoyed a loophole that exempted trust members from having to submit fingerprints and photographs and obtain approval from a chief local law enforcement officer.

Instead, a gun trust can buy or transfer the firearms under the less restrictive exemptions.

For years, the federal government has been working to close that loophole. In July, federal law will require all “responsible persons” of a gun trust to complete a specific form and undergo a background check, including fingerprints and photographs, with an appropriate chief law enforcement officer.

A “responsible person” is someone who has the power and authority to direct the trust to receive, possess, ship, transport, deliver, transfer or otherwise dispose of a firearm for or on behalf of the trust.

The changes mean the trust’s grantor, the trustees and in some cases the beneficiaries will have to go through background checks and submit photographs and fingerprints when the trust applies to receive a restricted firearm.

The new regulations ensure that the identification and background check requirements apply uniformly to trusts and individuals. A big change, however, removes the requirement that a purchaser obtain a signature from a chief local law enforcement officer. There will be a notice requirement, but no required signature.

The new law also makes it clear that an executor of an estate may possess the firearm of the deceased person without it being considered a transfer.
Gun trusts offer several advantages to individual gun ownership aside from the paperwork. They allow more than one person to legally possess and use the same weapon, assuming those people are legally able to possess a firearm.

Gun trusts help ensure the weapons are passed along responsibly when an owner dies by naming beneficiaries who presumably can be chosen based on their ability to act responsibly, and they smooth the process of moving to another state where there are different gun laws.

Trusts allow for families to maintain and preserve gun collections over several generations without having to pay transfer taxes or risk delays in the transfer process. They also allow NFA firearms to avoid probate, with the ultimate transfer to a beneficiary of the trust being exempt from NFA transfer taxes.

A trust ensures compliance with strict federal and state laws, avoiding inadvertent felony violations, particularly when there is an estate executor who isn’t familiar with restricted gun ownership rules.

Gun trust creation more than doubled in recent years after a flurry of legislative proposals to restrict guns. The ATF approval process on sales of guns can take months.

The ATF estimates that the new requirements will add $29.4 million in annual costs for trusts to submit the information and for the ATF to process it and conduct background checks on the responsible persons. That alone may prompt a rush to create trusts before the deadline.

Rebecca Flewelling is an attorney with the Boston-based law firm of Bowditch & Dewey LLP. She concentrates her practice in estate and trust planning, estate and trust administration, taxation, long-term-care planning and elder law.

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