Firearm Trusts

First, let’s discuss what a “trust” is.

A trust is a legal entity you can create by following certain state laws – to the letter! Trusts are purely creatures of state law. Every state has its own laws regarding what makes a trust valid in that state. But, if you create a valid trust in Florida, that trust is considered valid in every other state and will be interpreted per Florida law.

So, in Florida, if you hand your friend Joe $10,000 and ask him to hold it for the benefit of your son, Ben, and to only give it to Ben when he turns 30 or has his first child – and Joe accepts the money and your instructions – you’ve just created a trust. You are the Trustmaker (sometimes called the Grantor or Settlor), Joe is the Trustee, and Ben is the Beneficiary.

You no longer “own” the $10,000 – Joe, as the Trustee of your Trust does. But he doesn’t control how that money will be used – you do through your instructions.

You told him to only give it to Ben under certain conditions, and, as long as you retained the right to change the trust, you can change those conditions whenever you want. If you and Joe have a falling-out, you can even dump him as the Trustee and ask your brother, Bob, to become the Trustee.

Sounds simple, right? But, of course, problems frequently arise with informal oral agreements, so you’d really want to have that agreement in writing! The writing, which legally documents the terms of your trust, is generally called…you guessed it: a Trust Agreement.

In our example, you transferred money to your Trustee and trust. But almost any property can be transferred to a trust – including guns and ammo.

A gun trust is a limited-purpose revocable trust – the only property you’d transfer to the Trustee of your trust would be firearms, ammunition, firearm-related accessories, and maybe some cash or a small amount of life insurance (for reasons I won’t go into here). Since it’s revocable, it can be easily modified or terminated (revoked) during your lifetime.

First, a well-drafted gun trust can make it easier to control what happens to your gun collection if you become incapacitated or legally prohibited from owning firearms, and when you die.

Second, a gun trust will allow you to maintain a certain amount of privacy. Gun trusts are not registered with the state or any other government agency, and they do not become a public record at your death (unlike a Will).

Third, a gun trust can allow you to legally share your NFA/Title II regulated firearms with your family and friends.

Finally, a gun trust may help prevent “accidental felonies.” Felonies happen when you, your friends, and your family members inadvertently violate state and federal laws when using, transporting, or transferring NFA/Title II firearms.

NFA/Title II firearms include: machine guns, short-barreled rifles and shotguns, silencers (suppressors), destructive devices (e.g. Molotov cocktails, bazookas, mortars, etc.), and “any other weapons (AOW).” AOWs include things such as cane guns, gadget-type firearms such as “pen guns,” etc.

The NFA/Title II umbrella also includes any parts designed for fabricating any of these weapons.

A little bit of background…

Back in the 1930s, criminals such as John Dillinger, Bonnie Parker, and Clyde Barrow were making headlines. And the organized crime gangsters, which were the natural result of Prohibition, were also a big political problem. So the federal government decided to attack the guns being used by these criminals. (Sound familiar?)

At that time, it was widely acknowledged that the Second Amendment wouldn’t allow the government to prohibit the ownership of firearms, so the politicians decided to tax certain weapons out of existence instead.

The gangsters who made the news loved their Tommy guns and sawed-off shotguns, so The National Firearms Act of 1934 (NFA) imposed a registration process and a $200 transfer tax (about $3500 today) on the purchase or transfer of machine guns, sawed-off shotguns and rifles (technically, short-barreled shotguns and rifles), and silencers (suppressors). The expensive tax effectively took such weapons out of the hands of most law-abiding citizens.

Prohibition ended and gangsters were no longer in the headlines. The Supreme Court struck down the NFA’s registration process and, over time, public support for the law waned.

But the assassinations of the Kennedys and Dr. King in the 1960s made guns a political punching bag once again.

In 1968, the Gun Control Act (GCA) was passed. It did many things, but primarily brought all firearms regulation under the ever-expanding “interstate commerce” clause of the U.S. Constitution. It also banned the importation of military surplus weapons unless they met the now infamous “sporting purposes” requirement.

Title II of the GCA strengthened the old NFA law by resurrecting the registration requirement and adding destructive devices and AOWs to the list of regulated items. However, the $200 transfer tax was not changed or linked to inflation. Interestingly, the transfer tax on AOWs was set at only $5, not $200.

NFA/Title II firearms are sometimes also referred to as Class 3 weapons. All gun dealers must obtain a federal firearms license (FFL). A gun dealer who wants to offer NFA firearms must also pay a Special Occupational Tax (SOT). The amount of the tax depends on the business classification: an importer of NFA firearms is Class 1, a manufacturer of NFA firearms is Class 2, and a dealer of NFA firearms is Class 3. Since many people buy their NFA/Title II weapons from a “Class 3” dealer, such weapons have become colloquially known as Class 3 weapons.

So, NFA/Title II firearms such as machine guns, silencers, and short-barreled rifles (SBRs) are legal on the federal level, but you have to jump through some hoops to purchase or manufacture them. Additionally, some states may ban some or all NFA weapons.

However, no NFA weapons are banned in Florida.

The ATF changed the rules for transferring NFA weapons as of July 13, 2016. The alleged reason for the change was to close a non-existent “gun trust loophole.” (See below and this article for more information). The past is the past, so here I’ll discuss only the post-July 13, 2016 process.

The new rule now requires certain individuals associated with a trust – those who have the power to direct the management and policies of the trust pertaining to the transfer and possession of the NFA weapons (a.k.a. Responsible Persons) – to submit paperwork, fingerprints and passport-type photos just as individuals have always had to do.

There are actually two different procedures – one for individuals and one for entities such as corporations and trusts. This outlines the general procedures – your local NFA dealer can provide specific instructions.

(Please note: references to the ATF, BATF, or BATFE all refer to the same government agency. It just keeps growing and changing its name).

• For Individuals (Florida residents):
  1. Verify that you’re not prohibited by federal, state or local law from receiving or possessing firearms (over 21 and not a felon, fugitive, dishonorably discharged vet, drug abuser, illegal alien, etc.).
  2. Pay for your firearm.
     • If you’ll be receiving the firearm from a different NFA dealer (i.e. an internet sale with the firearm being delivered to your local FFL/NFA dealer), there will likely be an additional FFL to FFL transfer fee.
     • The selling NFA dealer will retain possession until BATFE approves the transfer.
  3. With your NFA dealer’s assistance, complete the ATF Form 4473 (5300.9 Firearms Transaction Record Part I – Over-the Counter)
  4. With your NFA dealer’s assistance, complete the ATF Form 4 (5320.4 Application for Tax Paid Transfer and Registration of Firearm). There are three copies that must be completed with original signatures – one for the ATF’s files, one for the ATF to return to you with your stamp, and one for your Chief Law Enforcement Officer (CLEO).
  5. Mail the CLEO copy of Form 4 to your local chief of police, county sheriff, head of the State police, or State or local district attorney or prosecutor.
  6. Mail the other two copies to the ATF with
     • the $200 transfer tax,
     • a recent color passport-type photo, and
     • two completed FBI fingerprint cards
  7. Wait 9+ months for BATFE approval.
  8. Rejoice when you finally collect your first stamp.
  9. Enjoy the responsible use of your new NFA firearm

• For Florida trusts:
  1. Verify that none of the individuals associated with the trust are prohibited by federal, state or local law from receiving or possessing firearms (all are over 21 and not a felon, fugitive, dishonorably discharged vet, drug abuser, illegal alien, etc.).
  2. Trustee, for the trust as the “buyer,”pays for the firearm.
     1. If you’ll be receiving the firearm from a different FFL (i.e. an internet sale with the firearm being delivered to your local FFL), there may be an additional fee.
     2. The selling FFL will retain possession until BATFE approves the transfer.
  3. Trustee, for the trust as the “buyer,” completes the ATF Form 4 (5320.4 Application for Tax Paid Transfer and Registration of Firearm). Your NFA dealer will generally help you with this. There are three copies that must be completed with original signatures– one for the ATF’s files, one for the ATF to return to you with your stamp, and one for your Chief Law Enforcement Officer (CLEO).
  4. Each “Responsible Person” (these will generally be the Grantor/Trustmaker and all current Trustees; not successor Trustees or Beneficiaries) completes his or her own separate ATF Form 23 (5320.23 NFA Responsible Person Questionnaire) as an individual. This form is very similar to the ATF Form 4473 (Firearms Transaction Record) you complete when you purchase a non-NFA gun from a dealer. There are three copies that must be completed with original signatures – one for the ATF’s files, one for the ATF to return to you with your stamp, and one for your Chief Law Enforcement Officer (CLEO).
  5. Mail the CLEO copies of Form 4 and each Form 23 to the appropriate local chief of police, county sheriff, head of the State police, or State or local district attorney or prosecutor.
  6. Mail the other two copies of Form 4 and all Forms 23 to the ATF with:
     • a full copy of the trust, including all schedules
     • a recent color passport-type photo for each Responsible Person, and
     • two completed FBI fingerprint cards for each Responsible Person
     • Wait 9+ months for BATFE approval.
     • Rejoice when you finally collect your first stamp.
     • Enjoy the responsible use of your new NFA firearm.
      
     • •  

     While using a gun trust to buy an NFA weapon is more cumbersome than it was before, there are still many reasons it’s the preferred way to own NFA and non-NFA firearms.

Absolutely not! You are not legally required to create or use a trust to purchase an NFA/Title II firearm. The laws allow individuals or entities to buy NFA weapons.

However, buying an NFA firearm as an individual creates some potential legal problems that can be avoided by using a trust.

The process for purchasing or transferring an NFA/Title II firearm is streamlined a bit when it’s done by an entity (a corporation or trust) rather than an individual.

Here are some things to consider when deciding between a corporation (generally a Limited Liability Company (LLC)) and a trust:

Corporation (LLC):

• Initial costs to legally create the entity
• Must have a business purpose (profit)
• Registered with the state of Florida, so it’s public information
• Annual reporting and associated costs
• Certain legal formalities must be followed to ensure the entity isn’t considered a “sham” – an entity not truly legally separate from its creator
• May provide some limited liability (only assets in the LLC are at risk) as long as the entity isn’t considered a “sham”

Trust:

• Initial costs to legally create the entity
• Private entity – not registered anywhere
• No annual reporting or ongoing legal formalities
• Does not provide any liability protection

Generally, for individuals who are not buying or possessing firearms for a business enterprise, a trust is the better choice. It’s private and easily modified.

You can create a gun trust that holds

• only NFA/Title II firearms,
• only non-NFA firearms, or
• both NFA and non-NFA firearms

We did our homework and decided to offer Gun Docx gun trusts. Gun Docx Gun Trusts are unique because they can be built to suit your needs and your budget. A Gun Docx firearm trust is purposely designed for owning, enjoying, and eventually distributing all of your firearms, ammunition, and accessories.

And, they’re provided by a Florida Gun Trust and Estate Planning attorney who is available to help you when you need it. Cindy doesn’t just dabble in gun trusts – she’s a staunch Second Amendment supporter so firearms are a core part of her estate planning, elder law, and asset protection services.

We offer three editions of Gun Trust plans – each with distinct features and pricing. See our Gun Trust Plans page for details.

Here are some things to consider when deciding between a corporation (generally a Limited Liability Company (LLC)) and a trust:

Corporation (LLC):

• Initial costs to legally create the entity
• Must have a business purpose (profit)
• Registered with the state of Florida, so it’s public information
• Annual reporting and associated costs
• Certain legal formalities must be followed to ensure the entity isn’t considered a “sham” – an entity not truly legally separate from its creator
• May provide some limited liability (only assets in the LLC are at risk) as long as the entity isn’t considered a “sham”

Trust:

• Initial costs to legally create the entity
• Private entity – not registered anywhere
• No annual reporting or ongoing legal formalities
• Does not provide any liability protection

Generally, for individuals who are not buying or possessing firearms for a business enterprise, a trust is the better choice. It’s private and easily modified.

Absolutely! The ATF doesn’t concern itself with the quality of your gun trust. They aren’t lawyers, and they really don’t care whether your trust will work the way you think it will if you become incapacitated, lose your firearm ownership privileges, or die. As long as the basic info looks good, and everything else is in order, you’ll get your stamp.

But, if you care about what happens AFTER you get your stamp, you might want to consider establishing a personal relationship with a Florida gun trust attorney – especially one who shares your passion and thoroughly understands how your gun trust works and how it fits into your overall estate plan.

We’ve all seen the advice and “wisdom” offered on various gun forums, where someone claims, “No one needs an attorney to do a gun trust. I did mine using XXXX for $29 and the ATF approved me – no problem! Lawyers just want to scare you so you’ll use their services instead.”

Well, as we’ve already pointed out, the ATF can’t tell the difference between a $29 gun trust and a $2900 gun trust – except that one likely has more pages. As long as all your ducks appear to be in a row, you’ll eventually get your stamp. Hooray!

As for lawyers scaring people – well, sadly, that’s kind of our job. We have to think about all the bad things that could possibly happen so we can try to protect you from them.

So, what happens if you use that gun trust software, happily acquire a couple of suppressors, and eventually discover that your trust isn’t valid in Florida due to some technicality or error?

You’d likely be in violation of state and federal laws for illegal receipt and possession of NFA weapons and maybe even tax evasion since you, as an individual, didn’t pay the tax – the trustee of a nonexistent trust did.

Even worse, what if the trust’s invalidity wasn’t discovered until you had died and your wife was applying to the ATF for approval to transfer the suppressors to your sons? Can you say “accidental felony” and confiscation?

Yes, those are worst-case scenarios. And maybe nothing would happen if “just this one time” you looked down the barrel of a loaded weapon. Or carried your .45 with your finger on the trigger. Or bought a $29 gun trust. Who knows?

But sometimes having a real person to talk to can prevent potential problems down the road.

There never was such a thing.

Some people claimed that somehow gun trusts provided legal loopholes for criminals to purchase firearms. They seemed to conveniently ignore the fact that criminals don’t bother with gun trusts because …(I know this is shocking)… criminals don’t need gun trusts to obtain weapons!

The truth is that everyone connected to the gun trust  – the Trustmaker, the Trustees, and the Beneficiaries (who have possession) – must be qualified under federal, state, and local laws to receive and possess firearms. This law is the same whether you buy a NFA weapon as an individual, a trust, or a corporation.

The so-called “loophole” was the 75-year old ATF rule that allowed entities such as trusts and corporations to bypass the CLEO certification requirement and to forego the hassle of submitting photos and fingerprints. This exception was specifically written into the existing laws – twice!

But despite the exception, no reputable gun dealer would allow a Trustee walk out of his shop with a firearm without doing an instant NICS background check – just as he would with any other firearm purchaser in the U.S.

Back in 1934 and 1968, instant computerized background checks (NICS) didn’t exist. Now they do, so the CLEO and photo/fingerprint requirements are simply archaic holdovers from the past.

Sadly, instead of bringing the requirements for individual purchasers of NFA firearms into the 21st century, as of July 13, 2016, the Obama administration instead chose to subject gun trusts to the archaic requirements of the 1960s. In the name of closing a non-existent loophole, lawful gun owners are now subjected to more paperwork and needless expenses.

Additionally, revocable gun trusts provide no protection from personal liability. If you  – or someone in possession of your NFA firearm – violates the law or hurts someone else while using, transporting, or transferring your NFA firearm, you could be held legally responsible, just as you would if you owned the weapon in your individual name.

According to the (ancient) statute, a violation of the NFA can result in a felony conviction punishable by up to 10 years in federal prison and/or up to a $10,000 fine. However, a more recent amendment allows fines of up to $250,000 for an individual and up to $500,000 for an entity, such as a trust or corporation.

Federal sentencing guidelines ordinarily require prison time, even for a first offense with no prior criminal record.

The statute of limitations on NFA violations is 3 years, but it doesn’t begin to run on possession offenses until the possession stops. As long as you possess the illegal item, you can be prosecuted.

Any NFA firearm that was ever transferred or registered in violation of the NFA is subject to civil forfeiture (confiscation and destruction). So, if you inherited an unregistered SBR or machine gun from your dad, it’s contraband and can’t be registered or legally transferred to your children. It can’t be used, and will eventually have to be confiscated and destroyed.

The forfeiture proceeding is separate from any criminal proceeding, and an acquittal on the criminal proceeding won’t preclude forfeiture.

Criminal penalties for violations of the GCA include both misdemeanors and felonies.  Misdemeanor convictions carry fines of up to $100,000 for individuals and up to $200,000 for entities. Felony fines can be up to $250,000 for an individual and up to $500,000 for an entity. Violations of the GCA also can result in forfeiture of the weapon.

And don’t forget how they finally got Al Capone! Under the general tax evasion statute, a willful attempt to evade the $200 transfer tax is a felony punishable by up to 5 years in federal prison and up to a $250,000 fine for an individual and up to a $500,000 fine for an entity. This is IN ADDITION to any other penalties provided by law.

Read more about the penalties for violating the NFA or GCA here.

Don’t play stupid games and you won’t win stupid prizes.

• If I’m carrying an NFA item in Florida, and am stopped by a LEO (law enforcement officer), what do I need to produce in order to prove that I legally possess that item?

Legally, you have no obligation to prove ownership of your NFA firearm to a LEO, such as a police officer, sheriff, or fish and wildlife officer, any more than you’d need to prove ownership of your rifle or handgun.  Only an ATF officer (and maybe the IRS) has the legal authority to demand to see your tax stamp. However, if you’d prefer not to spend a day or night in jail while things get sorted out, common sense and basic courtesy suggests you produce a copy of your tax stamp to any law enforcement officer who asks to see it. That’s all that’s required. You don’t have to carry a copy of your trust around. (Although I do have several clients who store a copy of their trust and their stamps in the cloud so they can access them if absolutely necessary). Keep your original stamps somewhere safe, put a copy in your gun trust binder, and keep a copy with the NFA item AT ALL TIMES.

• If I’m at a range with friends who are known to me, and my NFA regulated items are present, how may my friends legally handle and fire those items?

As long as you have your tax stamp in your possession and the weapons are within a few feet of you, share away.

• If I’m at a range and the range officer or other range employee or volunteer asks to see my tax stamp, do I need to produce it?

• I have a friend who I know is a responsible, lawful gun owner.  He would like to use one of the NFA regulated items in my trust for an afternoon at the range when I cannot attend.  Is there a way for him to be able to do this if I can’t be present?

• What are the legal risks to me and my trust if there is a mishap involving an NFA item, or any firearm, held in my trust?