Many people looking to purchase NFA Firearms wonder if they should put the guns into a special kind of trust called an NFA Gun Trust.
As you’ll see below, we don’t think using a firearms trust is worth it anymore. Sure, there was a time when a gun trust was a smart idea for your NFA firearms but with the ATF’s changes in how they are handled (Rule 41f), we don’t think an NFA Gun Trust makes much sense anymore. In fact, using a gun trust can now make things more difficult.
In this Gun Trust Guide, we’re going to cover:
- NFA Firearm Background
- Gun Trust Background
- Why Use an NFA Trust?
- NFA Trust vs. Gun Trust
- Are NFA Gun Trusts Worth It?
- NFA Trust vs. Individual
- Gun Trust (NFA) vs. FFL
- Setting Up A Gun Trust
- ATF’s New Trust Rules
- NFA Trust FAQ
NFA Firearm Background
There is a special class of firearms, called NFA or Class II firearms, that are highly regulated and require the payment of a federal tax and ATF approval before you may legally possess them.
This class of NFA Firearms includes:
- Silencers (suppressors)
- Short Barreled Rifles (SBR)
- Short Barreled Shotguns (SBS)
- Full-Auto Machine Guns
- Destructive Devices (DD)
- Any Other Weapons (AOW)
These guns are called NFA Firearms because they are regulated by the National Firearms Act of 1934 . They are also sometimes called “Title II” firearms because the NFA is considered to be Title II of American gun controls laws whereas the later law, the Gun Control Act of 1968 (GCA) is considered to be Title I.
These are also incorrectly called “Class 3 Firearms.” This is incorrect because, “Class 3” refers to the type of Special Occupational Taxpayer (SOT) a dealer is in order to sell NFA Firearms. So, an FFL with a Class 3 SOT (sometimes incorrectly called a Class 3 license ) can sell Title II (or NFA) firearms.
The Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) , regulates the creation and transfer of NFA Firearms and requires certain federal forms to be used in different situations.
For an individual to make their own NFA Firearm, they first need an approved ATF Form 1 .
For an individual to purchase an NFA Firearm from an FFL/SOT, they first need and approved ATF Form 4 .
For an FFL Manufacturer (a Type 07 FFL), they may submit an ATF Form 2 after it is made and the dealer purchasing it from another FFL for resale needs an approved Form 3.
|ATF Form 1||Making an NFA Firearm||Individuals (non-FFLs)|
|ATF Form 2||Making an NFA Firearm||FFL Manufacturers|
|ATF Form 3||Transferring an NFA Firearm||FFL to FFL transfer|
|ATF Form 4||Transferring an NFA Firearm||FFL to Individual|
|ATF Form 5||Transferring an NFA Firearm||FFL to Government|
Gun Trust Background
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 Form4s 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.
Enter the NFA trust.
Why Use an NFA Trust?
Ok, you understand what an NFA Gun Trust is for but now you’re wondering whether you should use one.
Next, let’s explore why a trust used to be a valuable tool in some situations followed by the changes from the ATF and how trusts are handled now.
Previous Gun Trust Rules
First, a discussion of how trusts used to be handled. This does NOT apply anymore and a discussion of the current trust rules after the ATF’s changes takes place below.
NFA Trusts used to have three main benefits:
- No Chief Law Enforcement Officer (CLEO) approval
- No fingerprints or photographs required
- Ability to share the NFA firearms 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 an NFA trust is 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 individuals enjoy the benefits of using a trust. If the rules aren’t followed carefully, a law-abiding citizen 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 previously, 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.
Current Firearms Trust Rules (ATF Rule 41f)
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.
After the ATF changed the rules on trust for NFA items, only one of the 3 previous benefits of using an NFA trust remains: sharing among members of the trust.
No Chief Law Enforcement Officer (CLEO) approval is required and no fingerprints or photographs required 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.
Arguably, this makes a trust much worse to deal with.
As I explain below in, Who is a “Responsible Person” on an NFA Trust? , 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.
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.
NFA Trust vs. Gun Trust
If you’re confused about the terms NFA Trust and Gun trust and want to know the differences between each, I can make this simple.
Although a gun trust could technically refer to any trust holding all types of firearms (not just Title II guns), it is almost solely used to refer to NFA Firearms.
Therefore, an NFA Trust is the same thing as a Gun Trust.
Are NFA Gun Trusts Worth it?
So, Should you Use an NFA Trust? Is a gun trust worth it?
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 ATFbefore 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).
NFA Trust vs. Individual
As we covered above, the main decision someone has when they are purchasing an NFA firearm and getting it transferred to them from an FFL Dealer is whether they want to take possession of the firearm as an individual or whether they want to use an nfa gun trust.
The choice is yours, however, we obviously believe that a trust is no longer worth using and can actually make things much more complicated.
Instead, if you’re looking to get some more benefits (shared possession, etc.) we strongly recommend looking into getting an FFL.
Gun Trust (NFA) vs FFL
A firearms trust no longer makes sense (to us).
Instead, if you’re looking for something better than taking possession of an NFA Firearm as an individual, you should look into getting an FFL.
An individual NFA transfer on a Form 4, even if you use a trust, requires a 10 month plus wait for ATF approval and the payment of a tax (usually $200). However, if you have your own FFL and become an SOT, your wait time is about 48 hours and you pay a $500 tax once a year no matter how many NFA Firearms you get.
Now, you can NOT get an FFL just for individual use. You must have a business intent. We cover all of this in our course on how to get an FFL .
Setting Up a Gun Trust
If you want to set up a gun trust, do NOT try to do it yourself.
It is fairly complicated and a mistake now, even if not caught by the ATF, can get you into a lot of trouble later.
If you want a gun trust, either hire an attorney or check out our friends at SilencerShop.com
ATF New Rules for NFA Trusts
This new rule by the ATF makes a few changes to the current regulations on making and possessing NFA firearms using trusts. Namely:
- “Responsible persons” must complete a specified form and submit fingerprints and photographs when the trust makes or acquires an NFA firearm
- Copies of the new “responsible person” form and the NFA application/form must be forwarded to the Chief LawEnforcement Officer (CLEO) for each “responsible person”
- CLEO signatures/certifications are no longer required
In addition to the major changes above, procedural changes and clarifications have been made. For example, the term “responsible person” has been defined and certain provisions have made it easier to handle NFA firearms in the estate of a deceased person.
Summary: Two of the three significant changes by the ATF increase the burden on the use of NFA trusts. These two changes ensure that each person that may lawfully possess an NFA firearm undergoes a background check and that local law enforcement is notified of each new NFA firearm possessed by a trust. The third significant change will make it easier for some people to make and possess NFA firearms without a trust. This change removes the requirement of lawenforcement approval for individual NFA applications/forms.
With these changes, much of the benefit of having an NFA trust no longer exists. Fingerprints and paperwork must now be done for each and every person on the trust and it is no longer necessary for some to avoid the CLEO approval requirement. The only remaining benefit is the ability to share NFA firearms among trust members.
Background: The National Firearms Act of 1934 (NFA) controls certain classes of firearms. NFA firearms, such as Silencers, Short Barreled Rifles (SBR), Short Barreled Shotguns (SBS), “Any Other Weapons” (AOW), “Destructive Devices,” and Machine Guns, were regulated in an attempt to prevent gang violence. These firearms generally require approval from the ATF before any person or entity may possess them and an excise tax must be paid (per item or yearly) for the manufacture and transfer of them.
An FFL manufacturer may make an NFA firearm by merely notifying the ATF that the NFA firearm was made. However, before that manufacturer may transfer the NFA firearm to another FFL, non-FFL entity, or individual, approval must be obtained from the ATF. Most FFL manufacturers and dealers of NFA firearms are Special Occupational Taxpayer (SOTs) which means that they pay the NFA excise tax as a yearly fee instead of a tax per item. Individuals, however, typically pay a $200 tax ($5 for AOW) for every NFA firearm they have transferred to them. Different ATF forms are used depending on the intended recipient of the NFA firearm. Also, special restrictions exist for some instances (post-1986 machine guns, for example) that won’t be discussed here because the new ATF NFA trust rule doesn’t affect them.
In addition to the application/form and the excise tax, individuals who want to posses an NFA firearm also had to submit fingerprint cards, photographs, and receive approval from their local Chief Law Enforcement Officer (CLEO). The biggest problem with this process was the “CLEO sign-off.” This was an issue because some CLEOs are anti-gun and they refused to approve the application from anyone in their jurisdiction even though the person was a lawful recipient and the NFA firearm was completely legal to possess and use. In effect, it allowed one person to restrict the gun rights of a group of people without cause.
A way around the CLEO sign-off requirement was to for a trust. According to federal firearm regulations, a person or entity may posses NFA firearms. A trust (or corporation) is an entity that can posses an NFA firearm and certain people that are part of the trust could then also posses the NFA firearm. Because the CLEO sign-off requirement did not apply to entities (trusts), an NFA trust was the best work-around for an activist CLEO. The fingerprint and photograph requirements also didn’t apply to NFA trusts.
Another benefit of an NFA trust involves who may posses the NFA firearm. As an individual NFA firearm possessor, you can’t let your friend borrow an NFA firearm. If you are both on the same trust, however, the NFA firearm may be possessed by anyone in the trust.
1. “Responsible persons” must complete a specified form and submit fingerprints and photographs when the trust makes or acquires an NFA firearm
The biggest complaint against NFA trusts was that the individuals on the trust didn’t have to submit fingerprints, photographs, nor undergo a background check upon the transfer of each NFA firearm. This change applies similar controls to individuals and members of an NFA trust.
2. Copies of the new “responsible person” form and the NFA application/form must be forwarded to the Chief LawEnforcement Officer (CLEO) for each “responsible person”
Another argument against NFA trusts was that local law enforcement was unaware of who possessed what NFA firearms in their jurisdiction. This article is long enough without me getting into this debate and explaining how this was not an issue and how lawful possessors of NFA firearms obey the law. This change will notify the CLEO of all NFA applications/forms.
3. CLEO signatures/certifications are no longer required
The biggest complaint against the CLEO approval requirement was that it allowed one person to over-rule a democratically elected legislature’s laws allowing the possession and use of NFA firearms. The requirement originally allowed the local law enforcement, who at the time was in the best position to know who should and should not possess an NFA firearm in their jurisdiction, to advise the ATF on how they should rule on the application. In modern times, however, the federal government is in a much better position than local law enforcement to determine who is permitted to posses an NFA firearm. Also, some CLEOs didn’t want to sign the form in fear that they might somehow be held liable for any wrongdoing the part of the possessor.
As you can probably tell, this issue intersected with the federal government not being able to conduct a background check on members of an NFA trust.
1. Definition of “Responsible Person”
The term “responsible person” for a trust or legal entity includes “those persons who have the power and authority to direct the management and policies ofthe trust or legal entity to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust or entity. In the case of a trust, those with the power or authority to direct the management and policies ofthe trust include any person who has the capability to exercise such power and possesses, directly or indirectly, the power or authority under any trust instrument, or under State law, to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for or on behalf of the trust.”
This means that every person that is part of a trust that may possess an NFA firearm of the trust and any person who is in charge of the trust is a “responsible person” and must submit the new form (ATF Form 5320.23) along with fingerprints and photographs. Effectively, they must undergo the same/similar process as individuals.
2. Rules easing the transfer of a deceased’s NFA firearms
Another reason some people liked trusts is the ability to have NFA firearms be “passed-down” to heirs without probateissues. While the estate is being sorted-out, the person in charge of the estate may lawfully possess the decedent’s NFA firearms without it being considered a transfer and the NFA firearms may go to any beneficiary of the estate (not just heirs) tax-free.
Who is a “Responsible Person” on an NFA Trust?
One of the multiple changes discussed above about the new trust rules, which include the removal of CLEO approval and new rules for handling firearms in an estate, is extra paperwork and approval requirements for “responsible persons.” These “responsible persons” on the trust will need to fill out a special form (Form 5320.23) and submit it along with fingerprints and photographs to the ATF with each application/form to make or transfer an NFA firearm. A copy of the “responsible person” form (Form 5320.23) and the NFA firearm application/form will also need to be sent to each “responsible person’s” local Chief Law Enforcement Officer (CLEO). The copies of the forms submitted to each respective CLEO are a notification to law enforcement only – no approval from the CLEO is required.
These are not the same as Responsible Persons for FFLs
This will significantly increase the paperwork burden – as many different CLEOs may be notified across the country as there are “responsible persons” on particular trust. It is important, therefore, to determine who is a “responsible person” on an NFA trust so that the proper paperwork can be filed with the ATF and the appropriate CLEOs may all be notified.
Here is the definition of a “responsible person” according to ATF’s Final Rule on NFA Trusts .
Responsible person. In the case of an unlicensed entity, including any trust, partnership, association, company (including any Limited Liability Company (LLC)), or corporation, any individual who possesses, directly or indirectly, the power or authority to direct the management and policies of the trust or entity to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust or legal entity.
In the case of a trust, those persons with the power or authority to direct the management and policies of the trust include any person who has the capability to exercise such power and possesses, directly or indirectly, the power or authority under any trust instrument, or under State law, to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust.
Examples of who may be considered a responsible person include settlors/ grantors, trustees, partners, members, officers, directors, board members, or owners. An example of who may be excluded from this definition of responsible person is the beneficiary of a trust, if the beneficiary does not have the capability to exercise the powers or authorities enumerated in this section.
In short, anyone who may lawfully posses an NFA firearm in the trust is now a “responsible person” and is subject to the new application, photograph, fingerprint, and CLEO notification requirements.
The new definition includes two groups of people: (1) those who are in charge of the trust (or other legal entity) and (2) in the case of trusts, those who may lawfully possess the trust’s NFA firearms.
Group #1 – First, the definition establishes a “responsible person” as someone who has “the power or authority to direct the management and policies of the trust or entity to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust or legal entity” This means that anyone who actually controls the trust language and has the power to modify it is a “responsible person.”
Group #2 – Then, when an NFA trust is involved, the ATF expands the definition to include certain persons who have the “capability to exercise such power and posses the power or authority . . . to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for or on behalf of the trust.” This means that anyone who has the power or authority to possess an NFA firearm in the trust, and who has the capability to exercise that power, is also a “responsible person.”
These first two sections of the definition could be interpreted by some to include only those people who are in charge of the trust who may also possess the trust’s NFA firearms. That interpretation is being used to say that trustees who are not “in charge” of the trust but instead may only possess the trust’s NFA firearms are not “responsible persons.” I think that interpretation is incorrect.
The most common argument I hear for the interpretation that trustees (or other possessors of NFA firearms in the trust who are not “in charge” of the trust) are exempt from this new requirement is that the trust-specific part of the ATFdefinition includes the word “and” instead of “or” and therefore includes only those who are in charge of the trust and those who may possess NFA firearms in the trust. This argument was persuasive. Essentially, the argument was that the first part (before the “and”) referred to those in charge of the trust and the second part (after the “and”) included those who may possess the NFA firearms in the trust.
The first part (before the “and”) reads: “In the case of a trust, those persons with the power or authority to direct the management and policies of the trust include any person who has the capability to exercise such power . . .”
The second part (after the “and”) reads: “. . . possesses, directly or indirectly, the power or authority under any trust instrument, or under State law, to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust.”
The crux of the debate is whether the language “capability to exercise such power” from the first part refers to the earlier language “direct the management and policies of the trust” or the later language from the second part, “power or authority . . . to . . possess.” If it refers to the first part, trustees aren’t responsible persons. If it refers to the second part, they are.
I argue that it applies to the second part. As an example, I am going to include the entire trust specific part of the definition below with a substitution of some words and with the controversial “and” italicized and bold. Before the trust-specific section, the ATF already defined “those persons with the power or authority to direct the management and policies of the trust” as “responsible persons.” Therefore, in the trust-specific language below I am going to replace the words ” those persons with the power or authority to direct the management and policies of the trust” with the words “responsible persons.”
In the case of a trust, [responsible persons] include any person who has the capability to exercise such power and possesses, directly or indirectly, the power or authority under any trust instrument, or under State law, to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust.
With the substitution, it makes it more likely that the “power” before the “and” is referring to the “power” after the “and.” Effectively, it would read: those that have the capability to exercise the power, and have the power, to posses an NFA firearm of the trust are responsible persons. Of course, I have taken some liberties with the language to try to make my point.
To help my position, I refer to the last part of the definition published by the ATF:
The ATF includes “settlors/ grantors, trustees , partners, members, officers, directors, board members, or owners” in the possible definition of a “responsible person.” The ATF can’t conclusively include exactly who is a”responsible person” by their title under/in the trust because each trust is written differently. According to this last part of the definition, it is true that a trustee may not be a “responsible person” in some circumstances. However, conversely, it says that sometimes they will be.
If the alternative argument above is true and only those lawful possessors who are also in charge of the trust are “responsible persons,” then a trustee could never be a “responsible person.” Instead, only settlor/grantor would be a “responsible person.” Therefore, I think that because it is possible for a trustee to be a “responsible person” in some circumstances, it is not necessary that someone be in charge of the trust to be considered a “responsible person.”
NFA Trust FAQ
Q: What is a gun trust? A: A gun trust is a legal entity that can possess NFA Firearms.
Q: Should you get a gun trust? Before, there were a couple of reasons t get a gun trust but now with the rule change, we think there is no good reason to get a gun trust.