What is a Gun Trust?
The Basics
Gun Trusts are special legal instruments that are designed from the ground up to acquire, hold, and allow the legal use of firearms, particularly those firearms that are regulation by the National Firearms Act (NFA). Learn more about the NFA on this link.
If someone wants to buy machine guns, silencers, or other NFA firearms, the best way to do so is in a gun trust. First, we draft your gun trust. Then, you go to your Federal Firearms Licensee (“FFL” – licensed gun dealer) of your choice and purchase the item. The dealer will then submit, or help you submit, some paperwork to the ATF, along with a copy of your trust, and payment for the applicable tax stamp ($200, unless you are buying an AOW then the tax is only $5). Then you sit back and wait for approval from the Bureau of Alcohol, Tobacco, Firearms, and Explosives (“BATFE” or “ATF”). That’s it. After approval, you can legally own and possess NFA Firearms, such as machine guns, silencers, and short barrel rifles and shotguns. There are certainly laws and regulations you need to be aware of, but we will educate you what you need to know when you buy your trust. Contrary to popular urban myths: no license is needed (not even a “class 3 license” – that is for dealers); the tax is a one-time payment, there are no annual fees; and the police or ATF cannot search your home any time they want – the Fourth Amendment still protects you from unreasonable searches and seizures.
Trusts, generally
A trust is simply a special type of agreement. Trust agreements happen all the time—often when we don’t even realize it. For example, a trust agreement would be established if I gave an orange to my friend Bob and asked him to give it to Charlie when he saw him and Bob agreed to do so. Bob would be holding the orange for Charlie. That is a trust, where I am the trust maker (often called grantor or settlor), Bob is the trustee (the person who holds the assets), and Charlie is the beneficiary (the person whom the assets are being held for). Trust agreements can be verbal, though such verbal agreements should only be utilized for simple things, like giving an orange to someone. After all, Bob could later claim the orange was a gift to him and it would be my word against his. If the dispute is over an orange, it is not a big deal. If the dispute is over a piece of real estate or a bank account, it is a problem. To prevent such problems and to ensure the trust maker’s wishes are followed now and many years in the future, we use written trust agreements in the estate planning world. An estate planning trust, usually referred to as a “living trust” or “revocable trust” is a convenient and effective way for one person to hold financial assets for the benefit of a third person or persons. It is an ideal way to ensure that one’s family receives the money and personal possessions in the manner the trust maker wants at their death, all while avoiding the time and expense of probate. In case you were wondering, wills do not avoid probate.
Trusts are incredibly flexible agreements that can be used to do accomplish a wide variety of estate planning goals. Assets put in a trust can potentially be protected from creditors, can be invested, can be sold, and can also provide regular income for the beneficiaries. Additionally, assets held in trust can eventually be distributed to the beneficiaries, effectively terminating the trust. While trusts are not terribly difficult to create, it is crucial that they are created properly otherwise a court may find them invalid, frustrating the grantors’ intentions and potentially harming the beneficiaries. This is especially true with Gun Trusts; it is absolutely crucial that Gun Trusts are done properly.
Gun Trusts
A gun trust has similar goals as a standard estate planning trust: to protect your family, ensure your assets are divided how you would like at your death, and to avoid probate. Despite these shared goals, a gun trust is very different from a standard estate planning trust and the two are not interchangeable. A standard estate planning revocable trust, which I will call an “estate trust” here, is designed to hold financial assets such as real estate or bank accounts. An estate trust should never be used to acquire or own NFA firearms. A gun trust is a very special estate planning tool designed to addresses the unique concerns, laws, and regulations associated with gun ownership, especially firearms that are regulated under the NFA. Estate trusts are simply not designed for that purpose.
Nearly every provision in a properly drafted gun trust should address gun ownership in some way. It is crucial that a gun trust be drafted by a knowledgeable attorney. All too often, people put their faith in computer software or a low cost non-attorney online service to generate their NFA trust. Saving a few hundred dollars by using such services is certainly appealing; however, such a decision may end up costing substantially more money in the long run. The laws and regulations that control firearms, and in particular NFA firearms, are highly technical, often confusing, and can easily be violated by accident. Ignorance of the law or good intentions is not a defense. Violations of the NFA carry extreme penalties: up to 10 years imprisonment, up to $10,000.00 in fines, confiscation of the weapons, and even confiscation of vehicles that NFA weapons were transported in. Plus, any willfull attempt to evade or defeat the taxes imposed by the NFA will subject the violator to an additional 5 years imprisonment and up to $500,000.00 in fines. Thus, total penalties for NFA violations are as long as 15 years in prison, as much as $510,000.00 in fines, plus confiscation. Additionally, violators may face long and expensive legal battles in attempt to avoid the penalties. On top of that, the violator faces the social stigma of the arrest and trial, and the massive hassle of a criminal prosecution that may drag on for years, even if the defendant ends up beating the charges. That is an awful lot to risk to save a few hundred dollars by getting an inferior gun trust.
The "Possession" and "Constructive Possession" Traps
It is important to discuss the hyper sensitivity of this area of the law. The ATF is extremely concerned with who has possession of NFA firearms. It is illegal to receive or possess an NFA firearm that is not registered to you. So what does it mean to “possess” an NFA firearm? Possession is an ambiguous term and is not limited to how “possession” may be used in every day use; it includes so called “constructive possession.” Constructive possession can be the same legally as actually holding something, say a silencer that is not registered to you, in your hands. It has been legally defined by courts as the “knowledge of an object plus the ability to control the object, even if the person has no physical contact with it.” The United States Supreme Court has stated that the government may establish constructive possession by demonstrating that the “defendant exercised ownership, dominion or control over the premises” where an item is found. Think about that, if you own a silencer, store it in a locked safe, and your spouse or friend happens to know the combination of the safe, your spouse or friend could be said to have constructive possession of the silencer. If it is not registered to them, they may be committing a felony by illegally possessing an NFA firearm.
The "Transfer" Trap
The term “transfer” is defined and interpreted very broadly by the ATF and has the potential to lead unsuspecting individuals into hot water through inadvertent NFA violations, just like the constructive possession problem. In fact, the two are closely related. The term “transfer” is defined as “selling, assigning, pledging, leasing, loaning, giving away, or otherwise disposing of” an NFA firearm. Notice that loaning an NFA weapon is considered a legal transfer. Since it is illegal to receive or possess an NFA firearm that is not registered to you, a loan is considered a legal transfer of possession. You must have ATF approval prior to making any transfer, including a loan. Make no mistake; it is possible that simply loaning your NFA gun to a friend to shoot while you both are at a shooting range could be illegal and subject you to the penalties mentioned above. As of now, the ATF has not been prosecuting people for such transfers of individually owned NFA firearms, but that could change in an instant. There is no support in the law which permits sharing individually owned NFA firearms! People have been prosecuted for illegal possession in similar scenarios before. One man was prosecuted for illegal possession of an NFA weapon because he merely held a suppressor for a few minutes. Another was prosecuted for grabbing a short-barreled shotgun to protect the life of another. Likewise, there have been numerous prosecutions when others merely knew of and had access to the NFA weapon, including those who reside under the same roof as the person to whom the firearm is registered (i.e. family members) – they had constructive possession and an unapproved transfer occurred. Don’t worry though, there is hope! Keep reading.
AZ Gun Law Gun Trusts Protect You from the "Constructive Possession" and "Transfer" Traps
NFA firearms are to be purchased and registered with the ATF in the name of the trust, not you individually. Thus, the gun trust is the legal owner of the weapons, and you as a trustee can legally possess, use, and sell the firearms. Likewise, if you are married, your spouse needs to be a trustee as well. In fact, everyone you live with ought to be included in the trust in one way or another. That way, under the terms of the trust, all of them can legally have possession and use the firearms, even if you don’t give them actual permission to do so. Likewise, our trusts also provide that anyone you go shooting with (I.E. shooting buddies, hunting groups, random guys at the range, etc) become temporary beneficiaries and trustees of the trust, giving them the legal ability to possess and use the firearms. And, no transfer occurred because the trust is the owner and provided for such use! Additionally, we provide all the forms necessary to prove the legality to any curious police officer or ATF agent. There are certainly things you can do with your NFA firearms that would be illegal, but the trust addresses most scenarios and provides the appropriate legal verbiage and necessary forms to ensure that you are protected. You will also receive instructions on when and how to use the forms.
Not All Gun Trusts Protect You from the Traps. In Fact, Most Don't
All gun trusts are NOT created equally. Far too many “gun trusts” out there are not properly drafted and leave you completely vulnerable to the possession and transfer traps. I see so called “gun trusts” regularly that permit, or even worse, direct illegal actions! They simply are not drafted to avoid the Constructive Possession and Transfer traps. Likewise, I have never seen a normal estate planning trust that dealt with these issues either – not one. A few sources of subpar gun trusts:
- Unscrupulous attorneys – It’s hard to believe, I know; there really are some unscrupulous attorneys out there. Some attorneys draft “gun trusts” but do not know what they are doing. A properly drafted gun trust goes way beyond the requirements needed to simply create a “legal” estate planning trust. Many use standard estate planning trusts and throw in a paragraph or two about guns.
- Computer software programs, such as Quicken Willmaker or LegalZoom – Computer software can be great for countless purposes, but creating a proper gun trust is not one of them. The software is not made to create gun trusts. Period. If you are thinking about using these for a gun trust, please contact Nolo (the maker of Quicken Willmaker) and tell them you are using their software to create a gun trust and see what they say. They will tell you what I just told you, don’t do it. In fact, they state on their website not to use it for a gun trust.
- Online trust companies, that are not attorneys – Do you really know what you are buying? Perhaps their trust will “work,” perhaps it will not. Do they even know Arizona laws? Can they give you legal advice tailored to your individual situation? Read on to see why that should concern you. How do you know if a Gun Trust “works” or not? There is a common misconception that a gun trust “worked” if the ATF approved your application and awards you with the tax stamp. This is simply false. Clearing the ATF is only the first step in a gun trust “working.” The gun trust must also be able to protect you and your family once you own the weapons. This means that the trust must comply with all legal requirements, must properly avoid the possession and transfer traps, must properly transfer the guns if you die or become incapacitated, must provide for a legally competent successor trustee, and must address the problem of underage beneficiaries (the minimum age to possess NFA items is 21).
What Happens if a Gun Trust Doesn't "Work"?
Do you really want to find out what is like to get caught in a trap? In the worst case you go to prison for up to 15 years, pay up to $510,000 in fines, have your NFA firearms confiscated, have your vehicle confiscated, and lose your right to ever own guns again. In the best case, you will probably have to pay an attorney to sort everything out, all while having tremendous risk of felony commission. Saving a few hundred dollars on the front end is not worth all of the risk. If you do not choose to hire us to draft your gun trust, please make sure you choose knowledgeable attorney. Remember, not all attorneys know how to draft a proper gun trust.
