Originally published on Kiplinger.com on February 6, 2019
BY: DAVID REDDING
Austin, TX Market President, Argent Trust Company
(512) 478-3188 | email@example.com
If you’re not a gun collector, you likely haven’t heard the term “gun trust.” Even if you are, you may not understand what a gun trust is, how it works or how it can be of use in an estate plan.
A gun trust is the generic name for a revocable or irrevocable management trust that is created to take title to firearms. Revocable trusts are more common, as they can be amended and changed during the lifetime of the grantor.
Although any legally owned weapon can be placed into a gun trust (and we’ll get into why that could be a good idea later), these trusts are specifically used for weapons that are classified under the National Firearms Act (NFA) Title II of the Gun Control Act of 1968. Examples of Title II weapons include a fully automatic machine gun, a short-barreled shotgun or a suppressor, sometimes called a “silencer.” The latter is a common piece of equipment that is purchased and owned by a gun trust. The trust is actually the owner of the firearm or suppressor.
Gun Trusts Provide Legal Protections to You and Your Heirs
So why might a gun trust become a necessary part of an estate plan when the grantor owns NFA designated Title II weapons? One obvious reason is that the transport and transfer of ownership of firearms that are so heavily regulated can easily become a felony without the owner even knowing they are breaking the law.
A gun trust allows for an orderly transfer of the weapon upon the death of the grantor to a family member or other heir. However, the transferee must go through the background check and identification process before taking possession of the firearm. That means the grantor should name as the final beneficiary a person or entity they know will be able to accept the weapon if the initial designated heir cannot, due to failure of the background check.
There are other reasons a gun trust can make sense. For instance, an NFA Title II weapon, such as a suppressor, can only be used by the person to whom it is registered and no one else. Violation of this law is a felony. Simply letting a friend or family member fire a few rounds with a Title II weapon at the local range or at the deer lease is a felony! A gun trust can be used to allow for the use of the Title II weapon by multiple parties. Each party who will have access to and use of the weapon must be a co-trustee of the gun trust and must go through the same required background check and identification requirements.
It is worth noting that the vast majority of firearms purchased and owned by U.S. citizens are Title I weapons, such as ordinary rifles, pistols and revolvers, and not Title II. However, it is fair to assume that as gun sales increase, the purchase of Title II firearms will also increase, and the gun trust will be a valuable tool for those willing to go through the rigorous and lengthy process to legally obtain a Title II weapon. The process includes:
- The filing of the Bureau of Alcohol, Tobacco, Firearms and Explosives’ NFA Responsible Person Questionnaire,
- Submitting photographs and fingerprints when a trust or legal entity is listed as the transferee on an application to transfer an NFA firearm, and
- Paying the required ATF registration fee, currently $200.
A Gun Trust Isn’t Just for Title II Weapons
For an owner of a large collection of firearms, it may make sense to transfer ownership of these weapons to a gun trust, even if the individual doesn’t own any Title II weapons. There are several benefits to doing this:
Protecting your privacy.
First, most states require an executor to file an inventory of the probate estate. Probate inventories are public documents filed with the court and are available for anyone to see. All firearms included in an estate would be listed on the inventory, along with the market value of each item. A public document on file in the courthouse with a list of all firearms owned, as well as the value of each, may not be the best outcome for the heirs. If the firearms are owned by a trust, the firearms are not included in the probate estate and will not be listed on the inventory.
Allowing for the disposition of your collection.
Second, if the collection has significant value and will be liquidated at the death of the grantor, a gun trust can also provide for the orderly disposition of the firearms by the successor trustee or remaining co-trustees. Depending on the language included in the trust, the proceeds from the sale of the firearms can be invested to provide an income stream to heirs or to charity.
Covering the possibility of incapacitation.
Third, an incapacitated person cannot own a firearm, so if the owner of a substantial firearm collection becomes incapacitated and has no spouse or significant other who can legally possess the firearm, the person taking possession of the firearm could be in danger of breaking the law. If the firearms are placed into a trust, the successor trustee would take possession of the firearms upon the incapacitation of the grantor and can hold or distribute the firearms based on the grantor’s intentions and wishes, as outlined in the trust document.
Smoothing the way for your heirs.
Lastly, the cost to create and administer a gun trust is relatively small compared with the potential negative consequences of running afoul of the complex laws surrounding the use and ownership of firearms, especially Title II firearms. Leaving a large collection of Title I weapons — or even a single Title II weapon — in an estate to be dealt with by an executor or trustee can be disastrous and avoidable with the use of a gun trust.
Contact a local attorney who has experience and understands the federal and state laws regarding the ownership and transfer requirements of all firearms if a gun trust sounds like a vehicle that could be of benefit.
David E. Redding, Market President and Senior Wealth Advisor at Argent Trust Company, helps clients navigate the complex world of estate planning, trust administration, wealth transfer and closely held business strategies. His 30 years of experience in the industry give him a depth and understanding to tackle real life problems faced by high net worth families as they plan for the transition of business interests and wealth to future generations.