(This article originally appeared at ryancleckner.com and is reprinted here with permission.)
By Ryan M. Cleckner
The number one question I have been asked all week is, “Should I use an NFA trust?” People interested in silencers, short barreled rifles, short barreled shotguns, machine-guns, or “any other weapons” usually consider whether they should use an NFA trust or purchase (or make) the NFA firearm as an individual. This has always been a common topic of inquiry but lately, with the announcement of ATF’s new rules for NFA trusts, everyone seems to be trying to determine if the benefits of an NFA trust are right for them now that the rules are changing . . .
Previously, in order for an individual (not an FFL) to manufacture an NFA firearm on an ATF Form 1 (Form 5320.1) or to purchase an NFA firearm on an ATF Form 4 (Form 5320.4), there were certain paperwork hurdles to cross imposed by Federal Firearms Regulations in 27 CFR 479.85. Namely, the individual needed to fill out the appropriate ATF Form, obtain approval from their Chief Law Enforcement Officer (CLEO), and submit fingerprint cards and passport photographs along with their application to the ATF. Once the application was approved, only that individual was permitted to possess the NFA firearm.
These requirements prevented some individuals from otherwise lawfully possessing an NFA firearm and they proved burdensome for others. In a few states, it is unlawful to possess an NFA firearm. In the majority of states, however, it is currently perfectly legal for a citizen to possess a silencer (suppressor), machine gun (made before 1986), short barreled rifle, short barreled shotgun, or an “any other weapon” as long as the federal requirements were met. Even in states where NFA firearms are lawful to possess, however, some CLEOs refused to approve and sign ATF Form 4s or Form 1s for residents in their jurisdiction. In effect, this was a one-person ban on certain firearms contrary to the democratically enacted law. Of those who were able to obtain a CLEO approval, some people felt that the fingerprint and photograph requirements were too burdensome and others didn’t like the fact that even their own spouse could not have access to their NFA firearms.
Current NFA Trusts (current/past)
Enter the NFA trust. Currently, NFA Trusts have three main benefits:
- No Chief Law Enforcement Officer (CLEO) approval
- No fingerprints or photographs required
- Sharing among “members” of the trust
Through its regulations, the ATF allows only “persons” to lawfully posses NFA firearms. As with many (most?) legal issues, it all comes down to the definitions. For example, if you didn’t look up the definition of “persons” in the regulations, you might think that only individual human beings could possess NFA firearms. In fact, the federal firearm regulations in 27 CFR 479.11 define “person” as:
“Person. A partnership, company, association, trust, estate, or corporation, as well as a natural person [(human being)]”
This means that entities/organizations such as corporations and trusts may also lawfully possess NFA firearms. The most popular of these non-human entities used for possessing NFA firearms is the trust. Interestingly, the fingerprint, photograph, and CLEO approval requirements imposed by 27 CFR 479.85 only apply to individual human beings and not NFA trusts. Therefore, individuals who were unable to obtain a CLEO approval or who didn’t want to deal with the fingerprint and photograph requirements would usually use an NFA trust to possess the NFA firearm.
Another benefit of the NFA trusts the ability for more than one individual to lawfully possess the same NFA firearm. When the trust is the lawful possessor of an NFA firearm, then any individual who is the settlor or a trustee of that trust may lawfully possess that NFA firearm. This means that if a group of individuals (family and/or friends) are part of a trust, then they all can share and have access to NFA firearms owned by the trust.
This shared access also had a benefit for estate planning. If an individual NFA firearm owner passes away, the NFA firearms must be properly transferred to their heirs/assigns. Fortunately, there is a tax-free mechanism for this but a transfer must occur none-the-less. If the heirs/assigns are part of the trust, then there is no transfer to take place. The firearms still remain transferred to the trust and the “members” of the trust still have access to them.
The biggest downside to a trust was the upfront complication and cost. Properly establishing a trust can be complicated and expensive. Many attorneys started selling “NFA Trusts” to help individual enjoy the benefits of using a trust. If the rules aren’t followed carefully, a law-abiding citizens could find themselves on the wrong-side of the law because of a clerical error or a mishandled trust. Because of this, I never recommend using a trust that was not drafted by an attorney who understands firearm laws. Unfortunately, this also adds cost to an already expensive hobby.
Another downside to NFA trusts is one of their intended benefits – estate planning. For example, if you have a lot of money invested in NFA firearms that are held in a trust with you and your friends, then your family will not be able to inherit the NFA firearms because they weren’t yours – they belonged to the trust. Even if some family members are part of the trust, the other family members won’t have access to the NFA firearms and your family may have a more difficult time selling the firearms if they need the money because they don’t own the firearms – the trust does.
Even with all of the benefits of an NFA Trust, however, I didn’t always recommend them to most people. Of course, if you couldn’t get a CLEO approval, you had no choice but to use a trust. But, for everyone else, I would explain the merits of using a trust and also the costs and upfront complications and let them decide. I wasn’t against using a trust but I definitely didn’t think that they were the best solution for everybody. For example, many of the people who asked my opinion on the matter already had NFA firearms registered to them individually. This meant that if they were to use an NFA trust for future NFA firearms, they still would be required to properly segregate their individually registered NFA firearms so that their family members did not have access to them. If they wanted to bring their current NFA items into their new trust, then it would be new transfer process, and tax, for each item.
Future NFA Trusts (after the new rules take effect)
ATF’s new rules for NFA trusts significantly change the benefits of an NFA trust. If you were previously “on the fence” about whether to use an NFA trust, these new rules are likely to push you to the non-trust side. Of the previous three benefits of using an NFA trust, only one remains:
No Chief Law Enforcement Officer (CLEO) approvalNo fingerprints or photographs required- Sharing among “members” of the trust
Also, there are some changes concerning the passing-down of NFA firearms to your heirs.
CLEO Approval Change – The benefit of not needing CLEO approval is now gone because nobody will need a CLEO approval under the new rules. Instead, every individual and every “responsible person” of a trust will only send paperwork to their respective CLEOs as notification – approval is not required.
Fingerprint/Photograph Change – The benefit of no fingerprint cards and no photographs for “members” of a trust is now gone because all “responsible persons” must submit fingerprint cards and photographs to their respective CLEO as notification and to the ATF for approval.
As I explain in my article, “Who is a “Responsible Person” on an NFA Trust?,”I believe that every person who may lawfully possess an NFA firearm in the trust is a “responsible person” and therefore must comply with the new fingerprint, photograph, and CLEO notification requirements. It is a matter of debate, however, whether every lawful possessor is a “responsible person” or whether it is only those who manage and control the trust.
A strict reading of the language published by the ATF will lead a reasonable person to conclude that the latter is true – only those who manage and control the trust must comply. However, the language published by the ATF is only part of their “executive summary” explaining their intent and is not the actual regulation. The ATF’s stated intent (in prior meetings with them) is to prevent an individual from avoiding the fingerprint and photograph requirements (and therefore the subsequent background check) by hiding as a trustee/possessor on an NFA trust.
Passing-down NFA Firearm to Heirs Change – The new rules make it easier for an individual to pass NFA firearms down to their heirs/assigns.
So, Should you Use an NFA Trust?
If your only purpose for getting/using an NFA trust was to avoid the CLEO requirement, then you no longer have a reason to use an NFA trust.
If your only purpose for getting/using an NFA trust was to avoid submitting fingerprints and photographs, then you no longer have a reason to use an NFA trust. Even if the new requirements only apply to the manager of the trust, if you are the one considering getting a trust, then the new requirements will surely apply to you.
If your only purpose for getting/using an NFA trust was for estate planning purposes so that your family would have your NFA firearms, you no longer have a reason to use an NFA trust.
If, however, your motivation to get/use an NFA trust was because of the ability to share possession of NFA firearms with those individuals in your trust, then it still may be a good option for you. It is definitely nice to be able to allow a trusted friend access to use and borrow an NFA firearm. It is also nice to not have to segregate the NFA firearms from your spouse – guys, do you feel like have a conversation with your wife about how she’s not allowed access to your “special safe?”
If you are going to use a trust to share possession, please be careful with interstate movement of NFA firearms. You must ensure that the NFA firearm is legal in every state you will travel through/to. And. you may need to get government approval before you travel or ship the NFA firearm. For example short barreled rifles require approval from the ATF before crossing state lines. Silencers, however, may cross state lines for limited purpose without prior approval (although it’s still a good idea to get it).
Also note that as far as I’ve been able to figure, trusts set up BEFORE the July change will never require prints and photos.
This could be a bonus to some, and incentive to start it now rather than later.
That’s not correct. The responsible person requirements will apply to all trusts. It doesn’t matter if you have had your trust for 30 years, 2 years, or get one drafted after 41F goes into effect.
Folks like me that use an NFA trust got hosed on this rule change. I will not be buying any more toys after this rule goes into effect with my trust for the pure reason that it is a total pain in the ass for me and all my co-trustees. If Silencer Shop wasn’t already completely out of stock I would have bought a couple more cans just for good measure. Good news is I have a bunch of cans already in the safe and have everything covered up to .338 Lapua. Over the past 4 years my credit card has been faster than Obummer’s pen and phone.
To clarify, new purchases by the trust would be subject to the responsible person documentation. Existing trusts that don’t engage in any future transactions are not affected.
There is also one really big loophole that many people seem to overlook. If I’m the only trustee on my trust when I submit the paperwork, I need to comply with the documentation requirements. If, however after I get my item, I add a new trustee, I don’t have to submit responsible person paperwork for them on any prior purchases.
Granted, if you start playing the amend the trust game each time you aquire a new toy, the Feds will not be pleased, but it will still be possible to add and remove trustees without having to do the responsible person paperwork for those changes.
I suspect that A trust could also be used to transfer all of your NFA holdings to a new person without the transfer taxes. Add the new person to the trust as a trustee, then have your name removed from the trust. The weapons remain the property of the Trust the whole time, only the trustees have changed.
Gentlemen, please stop caring whether the feds are pleased or not with HOW THE LAW WORKS. We are not British subject, for goodness sake. As far as I can tell, the feds left two large gaps in their strategy. People without managing powers over the trusts will not qualify as “responsible persons” and trustees not on the trust at the time of purchases will not have to submit prints or photographs. Use that information to your advantage.
So from my understanding, now I could apply for tax stamp and get a SBR in the people Republic of Taxachusetts without an NFA trust? (In a few months)
If MA allows SBRs, perhaps. That said, you may still run afoul of the AWB laws that prohibit many regular length modern sporting rifles.
Can you expand upon this statement in your article, “If your only purpose for getting/using an NFA trust was for estate planning purposes so that your family would have your NFA firearms, you no longer have a reason to use an NFA trust.”
This is the primary reason I have a trust…so my wife does not become a criminal should I die unexpectedly and so I could pass them to my son when of age.
What does the new wording state in terms of estate planning?
Even before this change, there were still mechanisms to pass your NFA firearms down. You’re just extra covered now because there will be no change of ownership from you to your heirs after your death because the trust will still “own” the items.
The new rules make the process easier and cover whoever is facilitating the passing down of the property. Whoever is handling your estate will be able to lawfully posses the NFA firearms without a transfer. The new rules also reinforce that a transfer to a decedent’s heirs is tax-free.
“The new section clarifies that the executor, administrator, personal representative, or other person authorized under State law to dispose of property in an estate may possess a firearm registered to a decedent during the term of probate without such possession being treated as a “transfer” under the NFA. It also specifies that the transfer ofthe firearm to any beneficiary ofthe estate may be made on a tax-exempt basis.”
The takeaway is that someone who is considering their first NFA purchase may not need a trust in order to pass down the NFA firearm. I don’t see any effect to your situation.
While the CLEO and Fingerprint/Photo is a little bit of a pain the biggest thing with the trust to me has always been the access issue. A NFA trust still covers this and it real is a very big deal if you have items in the house and you are not the only one with “access” whether it is the combo to a safe or a key to a lockbox. It is a very slick slope if something were to ever happen and the question of access came up in a legal setting. So for me the trust is still the only way to go.
Yep, same situation for me.
Me three…
BIngo.
I look forward to hearing about the NFA buying spree this spurs.
My home defense gun is a 300blk SBR with a supressor. The trust allows access to all of my family who are trustees.
OTOH, the rules don’t change for 180 days, plenty of time to establish a trust and order a full boat of NFA weapons, which will be grandfathered even if not finalized for ANOTHER six months. Right? I already have the trust, an SBR and a suppressor, trying to figure what else I might want to order. Possibly a 9mm suppressor, for use with a 9mm upper sometime for the SBR.
The new rules don’t go into effect for 180 days after the final rule is published. My understanding is that the final rule has not been published (this was only a summary and response to comments) so you have more than 6 months!
Hells yes, keeping funding the ATF…I mean additionally to your other taxes. They should make a tax stamp for shoulder thing if it goes up also.
Also, if the Hearing Protection Act somehow passes (i.e. we get a Republican President in the 2016 elections) then silencers won’t be Class III items anymore. Nobody will need to do paperwork or pay tax stamps for them anymore.
Now if people would only understand that there’s no meaningful difference anymore between certain handguns and many SBRs, then we could get that part of the problem taken care of too.
If the Republicans win the White House in 2016, I believe the Hearing Protection Act will pass.
And soon after that, fedzilla will remove short barreled rifles and shotguns from the list of firearms that require a tax stamp. Why? As far as I can tell, the alleged rationale for restricting short barreled rifles and shotguns 80 years ago was to prohibit people from making improvised “handguns” and/or making reasonably concealable firearms. With handguns and concealed carry being so prolific these days, that original rationale is meaningless … as is the corresponding law.
The fact that they didn’t make actual handguns NFA items (which was the original intent) meant that the rationale for the law was meaningless the day it was passed.
No.
Buy private property where you can shoot alone.
Build as many NFA toys as you want, shoot and enjoy them, and don’t waste your time and money on “stamps” to an illegitimate federal entity.
Can I add new trustees after the trust has been made and there are already NFA items owned by it?
You should check with your lawyer who drafted your trust, not ask a legal question like that here.
If you don’t have a trust, find a reputable lawyer who is familiar with NFA.
I have been informed that for my trust, and really for just about any revocable living trust, you can generally alter the parameters (who is a trustee, executor, beneficiary, settlor, …) at any point, including adding new grantees (people that are granted access to the items but cannot modify the trust).
But, ultimately, it depends on the wording of the trust. Again, seek legal council.
Yes
I’ve been wanting to get a NFA “toy” but I’m a merchant marine and away from home for several months a trust was suggested by my LGS. I just haven’t read up on them to know what they are.
You state that “negative” of a trust is inheritance.
That presupposes that you and your buddies got together and shared nfa. Bad idea.
The entire point of a properly written trust is exactly for inheritance- the beneficiaries.
Ex: In my opinion, your trust should have named your grandchildren as the resulting beneficiaries with your children as subsequent trustees after your death- instead of worrying about your beer buddies.
I agree with your opinion, but I fail to see how the opposite viewpoint is a “bad idea” (unless you have unreliable friends in the first place, which is always a bad idea). In fact I can’t figure how there aren’t trusts that will add you for a monthly fee and let you play with a selection of NFA toys.
Not to mention family can easily be more unreliable then friends considering you pick your friends but not your family.
So, if I really don’t like the government having my fingerprints on file, should I be setting up a trust very soon, or is it already too late to matter?
If you can get the trust up and the form 4 in before the July deadline, you can still beat the new rules. I’d recommend it to be safe.
You keep saying “[h]owever, the language published by the ATF is only part of their “executive summary” explaining their intent and is not the actual regulation. ”
However, the language quoted is directly part of the “final rule” portion of the reported rule change. My question to you is, isn’t that the final language that will be contained in the rule? Doesn’t the ATF have to publish the final language pursuant to the rules and processes surrounding the rulemaking process prior to issuing the final rule? If so, I don’t care what the ATF intended to do; what they managed to do is scrivener error, and wouldn’t they have to go through the whole process all over again to “change” it?
The author seems to forget that if a Republican is elected in November these rules will most likely evaporate in January of ’17.
Glad you’re that optimistic. I’m not. It’s politically easier to let a law/regulation “sunset” then it is to actively reverse it so there would have to be some politicl benefit to reversing it. Even the NRA’s initial reaction to the exec. order was, “is that all?” They;ve changed their tune but I doubt the lobbying pressure will ever be very intense…
I’m sure there are women who think their husband will “most likely” stop beating them after the baby comes, too.
To stray slightly from the topic at hand…
I find absurd the entire notion that machine guns, short barreled shotguns/rifles, or suppressors are sufficiently dangerous as to justify regulation by the BATFE. They are not nuclear weapons for heaven’s sake, nor are they likely to demolish an entire block. It’s time that we stop accepting that BATFE be allowed such judgment.
And while on this topic, similarly, there is no significant difference in the level of risk/safety between concealed carry and open carry. All arguments between the two are like arguing over the beneficial differences between a red apple and a green apple. While each approach has its advantages and disadvantages, that we even have legislation based on the difference is ludicrous.
Indeed.
turning a 36 inch rifle into a 28 inch rifle or putting a shoulder stock on a pistol does not make it more dangerous, does not make it more appealing to criminals, and even if it did, there’s nothing stopping them from making one illegally anyway, on account that they’re criminals.
I have a trust and submitted my form 4 in October. Good thing I got it in while I could I guess.
Would have liked a salvo 12 too, but no way will I have that money before July.
The question shouldn’t be if an NFA trust is worth it. The question should be, if the ATF is worth their continued existence? We jump through hoops and over hurdles for an agency that shouldn’t even exist in a free republic. The fact that the ATF has been bounced from the Treasury(IRS) to the DoJ, and back again, and again, shows that the capricious nature of their goals and rulings are in perfect alignment with those who have congenital statism/fascism on the brain. The ATF is the Federal Bureau of Infringement. The reality that NFA items are so rarely used in criminal activity, only shows that the intentions of the ATF towards Americas law abiding citizens are proof, that they are undeserving of either the trust, or the power they abuse in our name. Of course, it has always been so much easier for the ATF to find, restrict, and tax the law abiding. Criminals, not so much.
Aow can travel free too !
Another bullshit thats discriminated the other 4 as travler weapons in an complete unconstitunal law.
Question:
Once the responsible people in the Trust have done the fingerprinting, background, and pictures; will this have to be done again for every single new purchase? Or just the one time?
I ask because we are looking at adding folks to a trust, and it would turn into a major PITA if this has to be done every time. Thanks for your opinions and input.