With greater nationwide discussion regarding the use and ownership of firearms, a commonly-overlooked issue relates to the transfer of those firearms to beneficiaries upon death. It is estimated that nearly 40% of households in the United States own one or more firearms, and compliance with state and federal laws is of paramount concern to gun owners mindful of their safety and desiring to protect their investment. Developments in the law have also changed the manner in which firearms and accessories may be acquired, possessed and transferred. As a result, gun trusts have increasingly become critical to estate planning.
The basic purpose of any trust is to avoid probate in the distribution of assets to beneficiaries, and thereby prevent public disclosure of the nature and extent of your assets. In the case of firearms, ammunition and accessories, distribution of those items in a probate proceeding removes the privacy offered by a trust and could potentially compromise the safety and security of the personal representative and beneficiaries of the estate. Regarding the latter, opportunistic criminals might take significant interest in a probate estate that has a gun collection, and scour a public probate court file to obtain personal information regarding their potential targets. Further, distribution of guns, ammunition and accessories can become exceedingly complicated with estates and even conventional trusts, especially when fiduciaries and/or beneficiaries are disqualified under the law from owning or possessing those items due to such things as youth, a history of mental illness, or criminal history.
Among the most viable solutions to these issues is creation of a separate gun trust to own and eventually distribute firearms, ammunition and accessories. These trusts generally come in two forms: (a) specialized, irrevocable “NFA trusts” designed solely to acquire, possess and transfer certain items restricted by the National Firearms Act of 1938 (“NFA”) and Gun Control Act of 1964 (“GCA”), and (b) a separate revocable or irrevocable trust to hold, for example, Title I firearms (common handguns), hunting rifles, shotguns, and family heirlooms. The benefits of both include privacy, a more efficient means of assuring legal compliance, asset protection, and a stronger measure of responsible gun ownership. Even if you do not (or ever wish to) own an NFA firearm and already have a revocable trust in place that addresses the general disposition of your property on death, a separate gun trust can offer additional benefits and protections for you and your beneficiaries. A gun trust would also properly instruct your trustees regarding the disposition of your firearms and the legal requirements for doing so.
In light of this, caution is warranted when considering the use of form trusts purchased online or from gun retailers who offer them as an additional “service” at the time of a firearm or accessory sale. These supposed “one size fits all” documents might or might not have been drafted by a qualified attorney, will not consider your individual interests and goals, and quite possibly involves the unauthorized practice of law. The risks associated with their use can be substantial, including the possibility that the resulting trust would be deemed invalid or unenforceable in a court proceeding. With store-bought NFA trusts, the risks are particularly significant because an NFA trust deemed invalid by the Federal Bureau of Alcohol, Tobacco, Firearms and Explosives (“BATFE”) could subject the persons interested in the trust to prosecution for unlawfully possessing an unregistered NFA firearm. In fact, the current penalty for owning and/or possessing an unregistered NFA firearm, even if it was originally registered to an NFA Trust that was later invalidated (for example, because it was the product of the unauthorized practice of law), is $250,000 and imprisonment of not more than 10 years, or both.
It should also be noted that recent regulatory changes impacting NFA Trusts take effect on July 13, 2016. Under the new rules, every transfer of an NFA firearm requires identification of “responsible persons” (such as trustees), who must also provide their fingerprints and photographs with the transfer form submitted to BATFE. Responsible persons must also forward specific documentation to notify the local chief law enforcement officer of the transfer. Clarification of the new regulations is expected on the issue of whether this process must be undertaken with existing trusts, upon each transfer of an NFA Firearm, and/or at any time the trust is changed (such as to add or remove a trustee).
For our clients who own or are considering owning firearms, including NFA firearms, a properly-drafted gun trust is the most effective means to complete a comprehensive estate plan and assure compliance with numerous state and federal regulations related to the ownership, possession and transfer of firearms. For more information, please contact a member of Berry Moorman’s Estate Planning Group.