Resources

Gun Trust For some a critical part of legacy planning

image

As a widower, Bob is giving some thought to his estate planning. He has two adult children along with three grandchildren, all of whom share his enthusiasm for all types of

firearms. Bob wants to pass them down to as part of his legacy without any problems. In his estate plan, Bob created a revocable trust where he named his daughter, Anne, who is good with money matters, as his successor trustee.

His thought is to have the guns owned inside the trust along with much of the rest of his estate. However, he’s also heard of gun owners using a gun trust and wonders if he should too.

Importantly, it should be stated that the law surrounding the use of gun trusts has changed since 2016. Those changes have created a significant amount of confusion. Like Bob, many gun owners have been hearing a lot about the benefits of “gun trusts,” which are specifically designed to hold ownership of firearms. Usually, these trusts are used for firearms that are subject to strict federal and state regulations, but they may include other kinds of weapons as well. Gun trusts can make it easier to handle firearms after the owner’s death—and may prevent surviving family members from inadvertently violating the law.

The National Firearms Act (NFA) regulates the ownership of certain types of firearms and firearm accessories including machine guns, short barrel rifles, silencers, short barrel shotguns, destructive devices and a group of items called “any other weapons”.

In the past, gun trusts were used primarily to bypass the rule that required the sign-from the local chief law enforcement official (CLEO) to buy NFA firearms. Because of ATF Rule 41F (effective July, 2016), the same identification and background check requirements that apply to individuals now apply equally to trusts and other legal entities applying to make or transfer an NFA firearm. However, the ATF rule also eliminates the CLEO signoff requirement to acquire a NFA firearm. (Under 41F, the CLEO is simply notified, whether trust is involved or not.)

 

Rule 41F made it slightly more difficult to add additional responsible persons (i.e., trustees & trust protectors) to a gun trust in that it now requires identifying information and background check on these individuals. 

Rule 41F has a new provision regarding estates. The new rule makes it clear that during probate an executor or personal representative handling the estate of a gun owner can lawfully possess the firearm without it being considered a “transfer”—removing liability for possessing an unregistered firearm under the NFA. In addition, the new rules say that the transfer of a firearm to any beneficiary of the estate is free of transfer tax (for non-beneficiaries, the $200 transfer tax per firearm applies).

While gun trusts became less necessary after ATF Rule 41F, there are still several reasons to either maintain or establish a gun trust.

The first is privacy. Many gun owners are reluctant to discuss what they own. If you die with a collection of guns, your executor may have to list them on a public probate court inventory form. (Since that’s public, anyone with nefarious intent could see that guns were on the premises.)

By contrast, a trust sets out where the guns will go, as part of a private (non-probate) transfer.

The second reason to maintain a gun trust is that it represents the only way for multiple parties to have the right to use an NFA gun. An NFA item is specifically registered to an individual. If it is a trust, any trustee can possess it. For example, in Bob’s case, he wants Anne to run his estate’s revocable trust after his death, not his son Robert, who is terrible with money. But he wants both listed as co-trustees of his gun trust so each could use the guns in the trust on the range.

The gun trust’s successor trustee is subject to the new rules for "responsible persons." Rule 41F requires responsible persons of such trusts to, provide the CLEO – where the trustee resides - with notification, complete various ATF forms and to submit photographs and fingerprints.

The last reasons to consider a gun trust is risk management - by segregating firearms from the main trust, a gun trust may insulate the rest of the estate from possible tort liability arising from firearm injuries - and by providing for the temporary use of the firearms by multiple beneficiaries of the trust. (Caveat: The use must be infrequent and temporary - less than 30 days.)

Because of the overlapping powers of various estate planning documents, as well as the variance between state laws as they apply to firearms, a gun trust that is not part of an integrated, updated estate plan may cause more difficulties than it solves. It is another reason to take a comprehensive approach with your overall wealth strategy.

As always, you will want to consult with your attorney regarding this planning approach. 

Securities, investment advisory and financial planning services offered through qualified registered representatives of MML Investors Services, LLC. Member SIPC. 795 Ridge Lake Blvd., Ste 200; Memphis, TN 38120. 901.767.5951. The information provided is not written or intended as specific tax or legal advice. Neither Strategic Financial Partners nor MassMutual, their employees and representatives are authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.