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Firearm ownership is at the center of many legal discussions and debates in the United States, including how individuals can legally procure guns. In particular, gun trusts are often used as a viable path for those looking to transfer gun ownership with less so-called “red tape” — like providing fingerprints or undergoing background checks — than other pathways.
In this overview, we’ll provide a look into the benefits of gun trusts, why they’re important, and some guidelines for drafting one.
Benefits of Gun Trusts
Despite regulatory shifts — namely 2016’s ATF Final Rule 41F, which expands upon regulations established in the National Firearms Act (NFA) of 1934 — gun trusts continue playing a crucial role in estate administration.
They offer unique advantages, such as the ability to create “multi-generational,” “perpetual,” or “dynasty” trusts which ensure the longevity of firearm ownership within the trust. These can help protect against pending changes in gun regulation, ensuring the passing down of assets to the appropriate trustee.
Similarly, irrevocable “asset protection” gun trusts provide safeguards against lawsuits, divorce, and creditors, akin to traditional asset protection trusts.
Drafting a Gun Trust
Drafting gun trusts involves navigating potential pitfalls. For example, the grantor, trustee, and beneficiary cannot fall into the category of prohibited persons. This includes, but is not limited to:
Someone convicted of domestic violence,
Unlawful users of certain drugs or controlled substances,
Someone who has been committed to a mental institution,
Someone dishonorably discharged from the Armed Forces,
Someone who has renounced their US citizenship,
& others.
Additionally, the draft should give special attention to the trust document’s clarity regarding the weapon types, compliance with additional applicable laws (local, state, federal, etc.), and avoid potential name changes that would require the gun trust’s re-registration.
In-State and Out-of-State Transfers
One of the fundamental aspects of managing a gun trust is facilitating both in-state and out-of-state transfers, each governed by distinct regulations.
In-state transfers necessitate compliance with the Gun Control Act of 1968, which expanded restrictions on licensing and regulating guns and established additional clarification around “prohibited persons.” It also emphasized the importance of verifying the transferee’s residency and engaging a licensed dealer. The nuances of these transactions require careful navigation to prevent accidental violations.
Many states have their own unique regulations around intrastate gun ownership transfers that gun trust drafters should also comply with.
While in-state transfers are often complex, out-of-state transfers present a unique challenge on their own. Namely, that they are generally prohibited except in cases of inheritance. Understanding and adhering to the intricacies of these regulations is crucial to maintaining the trust’s integrity, ensuring legal compliance, and creating a viable trust with longevity.
Communicating with the ATF
Effective communication with the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) is a cornerstone of successful gun trust administration, particularly during estate settlement. Executors are encouraged to proactively engage with the ATF to inquire about a firearm’s registration status.
To initiate this communication, executors must provide documentation establishing their authority under state law, accompanied by other required documents. This proactive approach helps streamline the estate administration process and ensures that matters related to the gun trust meet all legal requirements.
Why Gun Trusts Matter
Estimates show that Americans own around 393 million guns nationwide, and Gallup data from 2020 shows 32% of US adults self-report as owning a gun, though 44% reported living in a household with guns. In Michigan alone, there are 4.3 guns for every 1,000 residents. With such high circulation numbers, the legalities and regulations around gun ownership and transfer only grow more complex. Creating a successful and legally-binding gun trust requires a nuanced understanding of firearm laws and their evolution.
As the legal landscape of firearm regulation continues changing, gun trusts remain a valuable tool for firearm enthusiasts and estate administrators alike. Seeking guidance from experienced attorneys is advisable, given the penalties associated with violations of the NFA and other firearms regulation entities. In a world where the only constant is change, staying informed is paramount for navigating the complex realm of firearm ownership and transfer.
Should you have any questions regarding Gun Trusts in our evolving firearm regulation landscape, reach out to attorney David de Reyna (dereyna@kotzsangster.com) or any of our tax and estate planning attorneys.
