What the heck is a Gun Trust?
We get this question all the time, and rightfully so. Who in their right mind would spend $1000 on a Short-Barrel Rifle, another $1000 on a Silencer, and $400 in ATF application fees, only to turn around and give it all away to some invisible entity called a trust? Sounds kind of crazy, right?
If you are like me, God, the wind, and gravity are probably the only invisible things you believe in. But now… we have to add Revocable Trusts to the list. I know, something just doesn’t seem quite right with this idea… But, as crazy as it sounds, trusts are real… and they are really confusing.
I think the best way to understand trusts is by using an analogy. Many years ago during law school, the professor of my Estates and Trusts class compared trusts to corporations. His comparison definitely made things make more sense to me. Hopefully it will do the same for you.
All corporations have several things is common:
Board of Directors. The Board creates the corporation by giving it start-up money or by contributing valuable ideas, but they don’t have much to do with the day-to-day business. The Board members don’t go to work every day, but they meet once a month to give advice and direction. Though they aren’t seen very often (as they are hidden away in some dark conference room on the 17th floor), the Board is ultimately in charge. They can buy and sell stuff for the corporation, and they can shut the corporation down in the blink of an eye.
Chief Executive officer (CEO). The CEO exists for the sole purpose maximizing the corporation’s value (aka Stock). The CEO makes the day-to-day decisions, which include buying and selling corporate assets, as well as directing how company assets are to be used. Additionally, the CEO gets to do cool stuff like use the corporate jet to fly to the Bahamas for the weekend.
Stock. The corporation’s stock represents the value of the company (how much stuff the company owns).
Vice-Presidents. There always seems to be a bunch of vice-presidents in every corporation, especially at banks (ever notice that every bank employee is either a Teller or a VP?). Vice-Presidents have a lot of power, so they get a set of keys to the bank. But, they aren’t so powerful that they can make major decisions on their own (like swapping the ATM out with a pinball machine). Because of their hard work, VP’s get some cool benefits, including a company car and the occasional set of floor-level Lakers tickets.
Investors. For the most part, investors don’t have any control over the day-to-day operations of the corporation. And, they don’t get use of the company jet, a groovy car, or basket-ball tickets. However, at some point down the road, the investors will finally get their share of benefits . For instance, if the corporation gets swallowed up by a bigger company, investors can sell their stock or take stock in the new company. Either way, they should make some decent money.
Trusts are very similar
The Settlor (aka Creator) of the trust is like the Board of Directors of a corporation. The Settlor creates the trust by giving it some property. The Settlor has little to do with the day-to-day operation of the trust, but they give advice and direction to the other members of the trust. The Settlor can add and remove property from the trust at any time, and they can kill the trust stone dead whenever they want, by removing all of the property out of the trust.
The property in a Gun Trust (money or NFA items donated by the Settlor) is much like the stock of the corporation (money and ideas donated by the Board of Directors). Each time the Settlor gives property to the Gun Trust, the donation is recorded on an Assignment Sheet. The Assignment Sheet contains a detailed description of each piece of property (make, model, serial number) and must be signed by the Settlor and witnesses to prove the property was given to the trust.
The Trustee is responsible for managing the trust, much like the CEO of a corporation. The Trustee makes all of the day-to-day decisions for the trust, including the purchase or sale of trust property. And, just like the CEO, the Trustee gets some really cool benefits, such as spending time at the range playing with the trust property.
The Co-Trustees of a trust are much like the swarm of Vice-Presidents in a corporation. Co-Trustees have a lot of power as they can legally possess and use NFA items owned by the trust. However, Co-Trustees don’t have the power to swap out a suppressor for a pinball machine. Yet, just like the corporate VP’s, Co-trustees get some pretty cool benefits, such as the opportunity to use the silencers, SBR’s and other firearms in the trust.
The Beneficiaries of a trust have no say in how the trust is operated, what property gets added to (or removed from) the trust, or how the trust property is used, much like the investors of a corporation. However, at some point down the road, Beneficiaries will be rewarded. When the Settlor dies, all of the trust property goes to the Beneficiaries, much like the proceeds from selling corporate stock go to the investors.
The Successor trustee
Trusts involve one other person that we didn’t cover above. If something happens to the Trustee, which makes it impossible for them to continue acting as Trustee, they are replaced by the Successor Trustee. Typically, this only happens when the Trustee dies or becomes incapacitated. However, there are times when a Trustee is replaced because they choose to quit acting as Trustee, or they become a “Prohibited Person” and have to step down, as they can’t possess NFA items any longer.
Before replacing the Trustee, the Successor Trustee is not involved with the trust. Important Note: This means that the Successor Trustee cannot possess the NFA items owned by the trust. In order to be able to lawfully possess trust property, the Successor Trustee would also need to be listed as a Co-Trustee. It is perfectly okay to name someone as the Successor Trustee that is also a Co-Trustee. This also means that the Successor Trustee is not considered “Responsible Persons,” so they do not need to send fingerprints and mugshots to the ATF (when the trust submits a Form 1 or Form 4 application).
After reading all this,
aren’t Gun Trusts as clear as mud?
Hopefully the idea of giving your $2000 Suppressed SBR to your Gun trust, doesn’t seem quite as crazy, now that you understand how trusts work. If the idea of a Gun Trust still doesn’t make sense, or if you have any other questions, just give us a shout. You can use the form at the bottom of this page to send your questions directly to the Gun Trust Lawyers. They are great about responding to questions because… those dudes love this stuff!
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