LawPulse

Gun trusts, a useful but controversial estate planning tool, can enable trust users to obtain federally restricted firearms without meeting some requirements imposed on individuals.

It is not often that an estate planning technique intersects with a hot-button political issue. However, the gun trust, a trend in estate planning, does just that.

Gun trusts are like other trust instruments; they allow for the administration of the testator's assets. They can also be used to obtain federally restricted firearms without facing some of the requirements imposed on individuals. This has been the source of most objections to gun trusts, leading to calls for changes to the federal regulations that allow the transfers. See Ericka Goode, Trust Offers a Legal Loophole for Buying Restricted Guns, New York Times (Feb. 25, 2013), available at http://nyti.ms/SsXEcN.

However, gun trusts have valid estate-planning purposes, and, as ISBA Trusts & Estates newsletter editor Darrell Dies noted in his June issue, more clients might ask about them now that Illinois has enacted a concealed-carry law.

Dies recommends University of Florida law professor Lee-ford Tritt's article in the Northwestern University Law Review entitled Dispatches From the Trenches of America's Great Gun Trust Wars (http://bit.ly/1N7GpqS). Tritt says that gun trusts are a useful mechanism for handling the ownership and disposition of federally restricted firearms, also referred to as Title II firearms.

Easing the application process

Under federal law, so-called Title II firearms include machine guns, short-barreled rifles, silencers, explosive ordnance, and missiles. 18 U.S.C. § 921(a)(4). Federal law imposes strict penalties on those who unlawfully transfer or possess Title II firearms. 26 U.S.C. §§ 5861(e), 5871. Gun trusts allow collectors to safely transfer their collections to family members after their death without exposing them or the executors of their wills to criminal liability.

Tritt also notes that gun trusts can be used to assist with the administration of any kind of firearm collection, even one that does not include Title II firearms. Complying with state and federal gun regulations is important for any collector who plans to leave the collection to specific beneficiaries.

However, he says, many gun trusts are not necessarily designed with long-term estate planning in mind. What makes gun trusts controversial is how they operate within federal gun laws.

The application process for an individual to obtain a Title II firearm is more rigorous than for a gun trust. Individuals must submit an application along with the signature of the local chief law enforcement officer and their fingerprints and a photograph. Trusts are exempt from these requirements.

Additionally, gun trusts allow for multiple ownership of restricted weapons. Since the trustee of a gun trust may possess the firearms on behalf of the beneficiaries of the trust, a trust with multiple trustees allows multiple individuals to possess the weapons on behalf of the trust.

Tritt also notes that there is a trend towards "temporary trustees," individuals who are added as a trustee for a short period of time, usually to allow that individual to legally possess a weapon at a firing range.

Not a DIY project

Gun trusts do not, however, allow people to bypass waiting periods for gun purchases, nor do they allow unauthorized individuals to possess firearms, Tritt says. Federal law prohibits specific types of people from owning Title II firearms, such as convicted felons, illegal users of controlled substances, and those dishonorably discharged from the military, among others. 18 U.S.C. §§ 922(d), (g).

When trusts do not take the legal status of intended beneficiaries into account, both executors and beneficiaries can be exposed to serious criminal liability, observes Tritt. "How many estate planners ask whether a beneficiary has ever smoked pot or received a dishonorable discharge?" A well-crafted trust should prohibit violations of federal and state law, providing guidance for trustees and beneficiaries.

Gun trusts have risen in popularity. Tritt says that whenever there's talk of closing loopholes in federal gun laws, gun trust applications spike.

These instruments are "amazingly popular" and have become a "mass market." According to Tritt, some gun stores provide form gun trust documents to customers. Some of these form documents are culled from the internet. Tritt has found gun trust forms for sale on the Internet as well.

He says lay gun owners are unwise to make creating a gun trust a DIY project. "Really, you want tons of trustee protection" built into the trust. Making sure that both trustees and beneficiaries are properly protected "really requires a lawyer."