Can Someone Explain How NFA Trusts Work?

SubieGuy4

SubieGuy4

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I realize the info I'm looking for probably exists in bits and pieces throughout NES but I'm having a hard time finding it.

I'm looking at putting in for my first NFA item and want to set up a trust. I know who I'm going to use to set it up and it's a good price. I'm just having a hard time understanding how the trust is used in practice.

Effectively right now I'm only getting it to bypass complications while submitting my forms. I'm sure later in life I'll have a family which I'll add to it (making the trust more useful) but right now it's just to make things easy and avoid having to re-pay the $200 per item later in life when I'll inevitably want a trust.

So I set up the trust. I'm the Trustee and a close friend is named as the secondary Trustee and Beneficiary to satisfy the minimum need for setting it up.

Now what? Do I have a piece of paper that I submit with my Form 4? What else happens? How does one make official changes (such as adding family members to a trust)? Just having a hard time understanding how it all functions once it's set up, and I'd like that understanding before I pay out to set it up.
 
An NFA trust isn't inherently different than having a business (e.g. a corporation) own NFA items -- you aren't buying the items and the tax stamp personally, the legal entity is the one making the purchase.

SubieGuy4 said:
Now what? Do I have a piece of paper that I submit with my Form 4? What else happens? How does one make official changes (such as adding family members to a trust)? Just having a hard time understanding how it all functions once it's set up, and I'd like that understanding before I pay out to set it up.
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If you buy your trust from GunTrustLawyer.com/GunTrust.com or another major vendor, it comes with detailed instructions on how to make it legal (by funding it and notarization, bank account optional) and how to use it and update it.

Exact process for making changes varies depending on your state and how the trust is written.
 
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I'm not trying to be a dick, but I don't think you're done with step 1 yet. I'm not offering this as legal advice, nor establishment of an attorney-client relationship - merely informing you with information easily found on the internet. If your trustee is also a beneficiary, you do not have a valid trust. A trust is more technical than meets the eye. If you attorney didn't catch that slip-up though, I suggest finding another.
 
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massBRS said:
I'm not trying to be a dick, but I don't think you're done with step 1 yet. I'm not offering this as legal advice, nor establishment of an attorney-client relationship - merely informing you with information easily found on the internet. If your trustee is also a beneficiary, you do not have a valid trust. A trust is more technical than meets the eye. If you attorney didn't catch that slip-up though, I suggest finding another.
Click to expand...

That's helpful. This is why I'm asking about this stuff. The person I'm talking to is suggesting I'd be both the trustee and beneficiary at the start and that the other named person would become the trustee in the event something happens to me and would also be the beneficiary.
 
lol sorry

I have to echo the earlier comment: Trustee and beneficiary need to be separate people. There is a clear conflict of interest. Think of selling something and having the buyer witness the contract.

Even though you are using the trust to make the NFA process simpler, you are still creating a legal entity that exposes your possessions to risk. You want the legal framework of that entity to protect you if something happens. You can't separate the NFA benefits from the legal framework of the trust: They are intertwined. Your firearms will be the property of the trust and thus trustees, that's a huge amount of risk.

My best suggestion is to choose a relative as the beneficiary.

Once your documents are executed by a notary, you need to scan them in, scan your license, and the assignment then use those files with your application.


EDIT: Yes, I think Jeff has an associate in NH. I would contact Jeff, he did my trust.
 
First, second, and last, I am not a lawyer. This is not legal advice. This is a process step-through, because that seems to be your question.

So, you have your trust. It's notarized, and funded. That means your trust has something in it. You've assigned something to your Trust, and it will show up on your Schedule A. Some people fund with cash, some with a firearm. Whatever. There are pluses and minuses to both, but your Trust needs to own something, and it owns something by you, the Trustee, assigning that "thing" to the Trust.

So, let's say you're at that point.

Now, you drive over to Joe's House of Transferrable Machineguns (I think it's in Boscawen), armed with a complete copy of your Trust (I bring two, but that's me) and LOTS of cash. You spy a West Hurley Thompson you can't live without and say "Oooo. I want that."

Joe takes your money and begins to fill out the ATF Form 4, Application for Tax Paid Transfer and Registration of Firearm. You give him a check or money order for the $200 NFA Transfer Tax, and a copy of your Trust paperwork, and under "Transferee," in Block 2a, he writes "SubieGuy4 Trust, 123 Your Street, Your Town NH 00031."

You and he complete the rest of the paperwork, with the Trust as the Transferee, and you signing as "SubieGuy4, as Trustee," where required.

Once that's done, Joe mails the Form 4 to the proper address at the ATF, and you start to wait. And wait. And wait. Although, trust Form 4's are running about 3.5 mo these days, so maybe only two "waits."

When the stamp comes in to Joe, he gives you a call, you go back in, and you get to pick up your prize.

Later, you may decide to add your wife, or girlfriend, but usually not both, as trustees, so they can play with the gun, too. The mechanics of that are specific to how your trust is written, but usually no harder than adding an amendment, and getting it notarized. That's lawyer stuff, and beyond the scope of this post.

Hope this helps. Ask any other mechanics questions you may have.
 
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SubieGuy4 said:
...You're killing me... That's exactly my issue. No realistic sense of what happens after step 1.
Click to expand...
The instructions I received were nearly as many pages as the trust itself, and were also copyrighted by Apple Law Firm.
bigblue said:
Why don't you just ask the trust lawyer these questions?
Click to expand...
That's the value-add of a lawyer-authored trust (as compared to buying a copy of Quicken Willmaker 2003 on eBay).
 
Kevin_NH said:
That's the value-add of a lawyer-authored trust (as compared to buying a copy of Quicken Willmaker 2003 on eBay).
Click to expand...

Or a few hours of reading the vast quantities of info on this subject on the 'net these days. This is getting to be well-trod ground these days.
 
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SubieGuy4 said:
I realize the info I'm looking for probably exists in bits and pieces throughout NES but I'm having a hard time finding it.

I'm looking at putting in for my first NFA item and want to set up a trust. I know who I'm going to use to set it up and it's a good price. I'm just having a hard time understanding how the trust is used in practice.

Effectively right now I'm only getting it to bypass complications while submitting my forms. I'm sure later in life I'll have a family which I'll add to it (making the trust more useful) but right now it's just to make things easy and avoid having to re-pay the $200 per item later in life when I'll inevitably want a trust.

So I set up the trust. I'm the Trustee and a close friend is named as the secondary Trustee and Beneficiary to satisfy the minimum need for setting it up.

Now what? Do I have a piece of paper that I submit with my Form 4? What else happens? How does one make official changes (such as adding family members to a trust)? Just having a hard time understanding how it all functions once it's set up, and I'd like that understanding before I pay out to set it up.
Click to expand...

These links might help you. This is not legal advice.

https://www.wealthcounsel.com/sites/2/assets/userfiles/files/2014-10-MO_Sample_Gun_Trust_(BRONZE_COMMENTS_10-18-12)(1).pdf

http://forums.officer.com/t107341/

http://www.86th.org/?id=nfa-trust#Assignment

http://blog.princelaw.com/2011/01/12/gun-nfa-trust-frequently-asked-questions/

http://www.ar15.com/forums/t_6_17/415446_Visual_guide__How_to_fill_out_a_Form_1_using_EFORMS.html
 
I posted a link in the other thread that walks you through the form 1 but it assumes you understand the trust process.
 
massBRS said:
If your trustee is also a beneficiary, you do not have a valid trust. A trust is more technical than meets the eye. If you attorney didn't catch that slip-up though, I suggest finding another.
Click to expand...

That is not entirely correct. A trustee can be a beneficiary, so long as he or she is not the SOLE trustee AND the SOLE beneficiary. Where there is one sole trustee who is also the sole beneficiary, the equitable doctrine of "merger" can render the trust invalid.
 
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You can't have two people on a trust as follows: Person A is a trustee, Person B is a trustee & also beneficiary. Third person required... Correct?
 
SubieGuy4 said:
[crying] in NH
Click to expand...

As other's have indicated, I do have co-counsel in New Hampshire, so I'd be happy to answer your questions, and if need be to amend and restate your NFA trust. It usually takes an hour or less of billable time. My current hourly rate is $150.

Based on what you've told me, unless your trust agreement has a well-drafted "merger doctrine" clause (most that I've seen don't), you may want to amend and restate your trust. You should be fine now, but upon your death, you risk merger of the trust -- potentially leaving your friend in a sticky situation.
 
bigblue said:
You can't have two people on a trust as follows: Person A is a trustee, Person B is a trustee & also beneficiary. Third person required... Correct?
Click to expand...

That is acceptable because there isn't one person who is the sole trustee and sole beneficiary. Merger only occurs when legal ownership (held by the trustee) "merges" with beneficial ownership (held by the beneficiary). Having two trustees prevents merger from occurring.

In such a scenario, however, I would counsel appointing a third trustee, as someday Person A (who in this hypo I assume is the settlor), is going to pass away. If that happens at a time when Person B is the only other trustee, merger might occur.

I draft my trusts to include a merger "savings" clause which prevents merger from occurring. It's a belt and suspenders approach, designed to avoid the effects of merger, which, in the case of an NFA trust, could be severe (possession of improperly registered NFA items by the trustee/beneficiary).
 

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