Using Guns Trusts to Transfer and Hold Firearms
One of the less commonly encountered issues the personal representative of an estate will encounter is the transfer of firearms from a decedent’s estate to the beneficiaries of the estate. However, when a personal representative is administering an estate that owns firearms, it is likely that there will be several firearms to transfer to beneficiaries or sell as the average gun owner in American owns eight guns. Gun trusts are an alternative to keeping firearms in your probate estate and help ensure that the personal representative of your estate does not run afoul of any federal or state firearms laws.
What is a Gun Trust?
A gun trust is a trust that is used to purchase, receive, transfer, and hold guns which are subject to certain federal laws and regulations. Like any other trust, a gun trust has one or more trustees, who hold legal title to the trust property, and one or more beneficiaries, who hold equitable title to the property. Typically, gun trusts hold firearms that are subject to certain federal restrictions which make them more difficult to obtain. However, gun trusts can also hold firearms which are subject to less stringent federal regulations if an owner would like to use one entity to hold and transfer all of his firearms. As with any trust, the grantor of the trust should not appoint himself as sole trustee and sole beneficiary as this will result in a merger of title and essentially negate the existence of the trust.
Federal Laws Governing the Use of Firearms
Before a more in depth discussion on the use of gun trusts, the following is a brief primer on the federal laws governing the ownership and transfer of firearms.
The Gun Control Act of 1968 (GCA) is the federal law governing the ownership of firearms that are held in gun trusts and this law has two main titles, Title I and Title II, which will be discussed in more detail below. The Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) then promulgates regulations pursuant to those laws and also is responsible for enforcement. The National Firearms Act of 1934 (NFA) was originally enacted to curb the ability of gangs to access certain types of firearms such as machine guns and sawed-off shotguns, as these firearms were frequently used by gangs when the NFA was originally enacted. Many of the provisions of the NFA were included in Title II of the GCA and the firearms governed by Title II are commonly referred to as NFA firearms.
The majority of firearms owned in the United States is governed by Title I and includes rifles, shotguns, and handguns. Title I firearms can be single-shot, bolt-action, and even semiautomatic. These firearms Title I firearms are regulated to a far lesser extent by the federal government than Title II firearms and so they do not require the NFA transfer tax or application process, which is discussed below.
Examples of NFA or Title II firearms include machine guns, short-barreled shot guns (commonly referred to as sawed-off shotguns), short barreled rifles, silencers, large bore firearms, explosive ordnance (including bombs, grenades, rockets, mines or other similar devices), and a final category called “any other weapon” which is defined as “any weapon or device capable of being concealed on a person from which a shot can be discharged through the energy of an explosive.” Transfer of Title II firearms is subject to strict legal requirements and failure to comply with these requirements can result in substantial fines and imprisonment. A transfer is defined as “selling, assigning, pledging, leasing, loaning, giving away, or otherwise disposing of” a registered Title II firearm. Before a Title II firearm can be transferred, it must be registered with the National Firearms Registration and Transfer Record. It is important to note that even letting another individual hold or use the firearm can be considered a transfer, so the only persons who can use the Title II firearms held by a gun trust are the trustees.
A Title II firearm can only have one owner and a gun trust qualifies as a single owner as it is a single entity, even if there are multiple trustees as long as each trustee is legally eligible to hold Title II firearms. A trustee must be at least eighteen years of age in order to possess a Title II weapons and must be twenty-one years of age to purchase a Title II firearm.
Requirements under the New Regulations
The Department of Justice has amended the regulations of the ATF concerning the making or transfer of Title II or NFA firearms. Under the previous regulations, only individuals were required to provide fingerprints, photographs, and certification signed by a chief law enforcement officer when they were applying to make an NFA firearm or were the transferee on an application to transfer an NFA firearm. Under the new regulations, both individuals and trusts and other legal entities will have to provide fingerprints and photographs. However, instead of the requirement for a certification signed by a chief law enforcement officer, the applicant and/or transferee will only have to provide notification to a chief law enforcement officer.
In the case of a gun trust, the individual who will have to provide the fingerprints and photographs is referred to as a “responsible person”, that is, those persons who have the power and authority to direct the management and policies of the trust, namely the trustees. For all transfers on or after July 13, 2016, including applications to make NFA firearms, every “responsible person” will have to submit a Form 23 including a passport style photograph of the “responsible person” and duplicate FBI Forms FD-258 fingerprint cards. These required documents are in addition to Form 1, Form 4, or Form 5 (depending on the situation) and any documentation necessary to show the existence of the trust.
Benefits of Using a Gun Trust
In addition to being used as a vehicle to transfer guns after an individual’s death, gun trusts can also be used to purchase guns. It is also key that the funds used to purchase the firearms come from the trust instead of using an individual’s personal funds. The trustees can then use the firearms held by the gun trust subject to any conditions that are written into the terms of the gun trust and also subject to federal, state and local laws. It is illegal for anyone but the registered owner of the NFA firearm to use or be in possession of the firearm and one way to avoid triggering that law is to name multiple trustees.
Gun trusts often have guidance written into them that advises the trustees about what requirements must be met before a beneficiary can use the firearms held in the trust. Examples of special terms you will see defined and used in a well drafted gun trust are “National Firearms Act”, “Gun Control Act”, “Bureau of Alcohol Tobacco Firearms & Explosive”, “Title II Firearms”, and “Prohibited Person”. The usage of these terms provides guidance to your trustees about special issues that arise in the administration of a gun trust and ensures that there are no violations of any of the laws governing the use or transfer of the firearms.
Gun trusts also provides a higher level of sophistication regarding the navigation and compliance with the law than simply having the personal representative of an estate handle the firearms, as he or she may have no experience whatsoever handling guns or transferring them. One major benefit of using a gun trust is that it provides a method for holding firearms in the event the gun owner becomes incapacitated. A properly drafted gun trust will instruct the trustees on federal gun laws concerning the federal, state and local requirements for possession and transfer of the firearms held by the trust. It will further provide guidance on any state and regional gun laws where the firearms may be transferred if one of the beneficiaries lives in a different state than where the guns are held by the trust. Finally, a well drafted gun trust will provide guidance on the proper method for completing any transfer and the eligibility of the trustees and beneficiaries to hold and receive the firearms held by the trust.
Failing to comply with federal laws regarding the holding and transfer of certain firearms can result in substantial fines and imprisonment. Gun trusts should always be revocable so that trustees and beneficiaries can be added and removed as necessary. This is essential because there must be a method for removing trustees and beneficiaries in the event they become a “prohibited person” and are no longer eligible to hold Title II or NFA firearms. Examples of prohibited persons are those who have been convicted of a crime punishable for more than one year, wanted fugitives, those who have been dishonorably discharged from the military, those adjudicated as mentally defective or who have been committed to a mental institution, unlawful users of or addicted to any controlled substance, are an illegal alien, have renounced United States citizenship or who have been convicted of a misdemeanor crime of domestic violence.
Issues with Administering Estates that Own Guns
There are several issues that the personal representative of an estate will encounter when administering an estate that owns firearms, whether or not the firearms are governed by Title II.
One of the first issues will arise before the personal representative even takes physical possession of the firearms. As soon as the personal representative is officially appointed by the Register of Wills, he will be deemed to have legal possession of the firearms, regardless of whether he lays a hand on the guns. This can pose significant problems if the personal representative is otherwise restricted from possessing firearms. As previously discussed, there are several classes of people who are absolutely restricted from possession of NFA firearms. Moreover, “possession” of a firearm includes both actual and constructive possession. Circuit courts have ruled that constructive possession occurs when a person has the power and intent to exercise dominion and control over an object. This includes when a person is appointed as the personal representative of an estate and therefore has the right to possess the firearms as an asset of an estate. Even the personal representative simply knowing that that there is a gun in the decedent’s house can be enough for criminal prosecution.
As detailed above, there are several legal requirements that must be met when transferring firearms governed by Title II. If the personal representative does not know that he or she needs to comply with those laws, he or she could be subject to criminal prosecution.
A final issue that can occur when there are firearms in a decedent’s estate is the personal representative not knowing how to safely store and handle the guns. During the administration of an estate, it can often take several months before distribution of the assets of the estate can occur and during that time, the decedent’s firearms must be responsibly stored. Even a process as simple as transferring the firearms out of the decedent’s residence can result in serious issues if the personal representative does not know how to safely handle and transport firearms.
If you have questions about transferring firearms as part of your probate estate or through a gun trust, our experienced Estate Planning Attorney in Philadelphia can help.