[NOTE: The video above, prepared immediately after Gunpocalypse, is more up to date than the article below. Certain benefits such as privacy and probate avoidance, though still technically possible, look increasingly doubtful or of lesser benefit for typical estate planning with a long horizon. For an example of how gun planning might look in California, read about the Jefferson election. As always, see a qualified attorney for comprehensive advice.]
Do you still need a gun trust? New ATF Rule 41F (effective July 13, 2016) eliminates the chief law enforcement official (CLEO) signoff requirement to acquire a NFA firearm–until now the most popular reason to set up a gun trust, which was a way around it. (Under 41F, the CLEO is simply notified, whether trust is involved or not.) Purchasers and dealers wanted quick and simple gun trusts not likely to slow down the transaction, and this led to gun trust mills (with or without attorney) and a general disregard for estate planning considerations. Also, Rule 41F makes it slightly more difficult to add additional “responsible persons” (trustees, and depending on powers trust protectors, etc.) in that it now requires identifying information and background check on these individuals. The ability to add multiple trustees without background check was seen as a key gun trust benefit in many states. So Rule 41F is bad for gun trust mills, but good for non-mill gun trust attorneys in that now gun trusts can be recognized for other, more important benefits with respect to all guns, both NFA and conventional.
- TRANSMIT FIREARM LEGACY FOR GENERATIONS: This is listed first as it is by far the most important. The trust is the only effective means for firearm legacy to be transmitted over multiple generations without dilution. Just look at the Founders who obviously had an excellent militia ethic but, if the War of 1812 is any indication, failed to transmit that ethic to their children. What if each of us included, in our written family constitutions, provision for regular firearm training and testing under time pressure according to objective, immutable performance criteria? What if, in addition to shooting skills, the trust incentivized regular carry and competition, instructor certification, and related activities such as reloading and gunsmithing? Much as a forward-looking business plan can have immediate benefit, this type of dynastic family planning can have a positive impact on our families even while we are alive.
- PREVENT ACCIDENTAL FELONY: The worst legacy you can leave is for a family member or friend to become an accidental felon as a result of a poor estate plan that does not guard against unlawful transfer or possession of firearms. This can happen to those who handle your affairs when you are incapacitated, or who settle and distribute your estate once you pass on. It can also happen to beneficiaries (like that nephew on medical marijuana). Violations may occur because of jurisdictional issues (for example, a firearm is transported to a state that considers it a banned “assault weapon”); or because of issues with the firearm itself (perhaps a modification turning it into a NFA item, unregistered and therefore contraband); or because of issues with the recipient or even the trustee herself (there are many categories under federal and state law under which they may be deemed “prohibited persons” unable to possess firearms). How does a properly drafted gun trust reduce the likelihood of accidental felony? For one thing, you can select a trustee, possibly one different than the trustee under your main trust, who knows guns well enough to at least spot issues and get help where needed. (You could appoint a special trustee under your main trust to deal with guns, but it makes more sense to do this in a separate trust built for guns.) Also, in a properly drafted gun trust the language will educate the trustee by highlighting potential issues and will limit the trustee’s authority in certain ways to reduce the likelihood of accidental felony. And in California, having a separate gun trust avoids a technical felony that may occur if married gun owners have only the common joint living trust.
- MAINTAIN PRIVACY: Do you want your guns to be a matter of public record? That could happen if you don’t have a trust and probate or conservatorship is necessary. A popular benefit of trusts in general is that they avoid unscrupulous solicitation of heirs by predators pouring through public probate records on a regular basis. The concern is obviously far greater with regard to guns. Instead of a harassing call, your heirs may receive a visit at 3am involving broken glass! With a gun trust, there is total privacy. Gun trusts are typically funded using a general assignment of all your firearms, ammunition, firearm accessories, willable Front Sight memberships, etc., so you do not need to list your guns in the trust instrument. (Normally, no one else is going to see your gun trust until incapacity or death but privacy of this information is important if you need to show the trust for some other reason. For example if you are applying for a NFA firearm, ATF will need the NFA items listed but does not need to see the others.) Instead, as trustee you will simply maintain an inventory spreadsheet in your gun trust binder.
- ALLOW TEMPORARY USE BY MULTIPLE BENEFICIARIES: Even in California, a gun trust can provide for use by multiple beneficiaries. [UPDATE: AB-1511, signed by Gov. Brown on July 1, 2016, now limits these loans to immediate family members.] However, the use must be infrequent and temporary (less than 30 days). [Adding multiple trustees, on the other hand, may be problematic in California.]
- FAMILY MAINTENANCE / BONDING THROUGH RECREATION: Beginning immediately, the gun trust can provide generations of recreational activity organized to maintain family ties, with incentives to attend.
- AVOID LIQUIDATION OF FIREARMS WHILE PROHIBITED FROM POSSESSING: An established gun trust may be useful in some cases where the grantor is suddenly prohibited from possessing firearms due to one of several types of protective order. With court permission, grantor’s agent under power of attorney may transfer the firearms to himself or another as successor trustee of the gun trust; however, the court must be assured grantor lacks control over the trust and this may require amending the trust instrument to something resembling what I occasionally use (guided by Henderson) for clients prohibited now but expecting restoration of gun rights within a few years, for example under CWIC 5150 due to 72 hour hold, or where a plea of guilty to a “felony/misdemeanor wobbler” is anticipated soon.
- AVOID CONSERVATORSHIP DURING INCAPACITY: Control what happens to your firearms while you are incapacitated due to illness or injury! (You might actually recover, and wonder what happened to your favorite carry gun!) A danger with many of the mill-spec (as in gun trust mill) gun trusts is that they often are not at all integrated with an estate plan, if one even exists. A properly drafted gun trust will allow a successor trustee to take over in the event of incapacity, but unless there is a valid power of attorney granting an agent authority to transfer firearms to the successor gun trustee, conservatorship may be required for an order allowing the transfer. (A power of attorney executed for use with the gun trust may have the effect of revoking one done as part of an estate plan, causing other problems).
- AVOID PROBATE AT DEATH: Control what happens to your firearms after death! In California, full probate is also expensive. I have a dozen or so clients with gun collections alone valuable enough to require full probate. Smaller estates below $150,000 may avoid full probate using an affidavit procedure. The small estate affidavit procedure is also expensive. Both may possibly be avoided using a gun trust. (If you are thinking “why not just avoid probate by putting the guns in my joint trust” keep in mind the technical felony possible with joint trusts.) [The potential benefit of avoiding probate is increasingly limited and doubtful in California, so in case the law does not improve, it is important to have a backup plan mandating cooperation between executor and gun trustee, or requiring executor to create a testamentary gun trust.]
- AVOID COURT WHERE BENEFICIARY IS MINOR: Court involvement may be necessary where a distribution is made to a minor. A properly drafted gun trust will avoid this outcome by retaining the firearms in trust until the beneficiary reaches the required age.
- TRAIN AND EVALUATE BENEFICIARIES PRIOR TO USE OR DISTRIBUTION: For those firearms to be distributed rather than held for generations, a gun trust can allow evaluation of beneficiaries over time prior to distribution of firearms. This is important not only with regard to minors, but also adult firearm novices.
- AVOID OR DELAY CONFISCATION UNDER STATE OR FEDERAL BAN: A gun trust may possibly avoid or delay confiscation under a future state or federal gun ban. We can only guess as to this benefit without knowing specifics on the future legislation, yet our guesses can be informed by previous attempts at gun control. For example, a federal ban may be accomplished with an expansion of NFA to cover more firearms and we can speculate that retention may be easier if held in a dynasty trust. With a state ban (for example in California the various attempts, some successful, to expand our ban on “assault weapons”), typically there is a grace period during which the firearms may still be purchased (boon for dealers), and then another grace period during which owners may register the affected firearms. Under such a law, a gun trust might be used to keep the guns in the state longer. This would involve transferring the firearm to an adult child (or other young family member) who will be the registrant and serve as trustee. At the end of the child’s long life (if Sacramento has not grown up by then) the child’s successor will need to remove the “assault weapon” from the state but will do so under trust terms providing for continued use of the firearms to train the family on vacations using trustees located out of state. (Again, if California law is still muddled regarding trust transfers of firearms at death, there is a backup plan where the executor sets up a testamentary trust on the same terms.) [UPDATE: Gunpocalypse happened, get your planning done now!]
- BENEFIT GUN ORGANIZATIONS OR RELATED CHARITABLE ORGANIZATIONS: A gun trust can be used to benefit gun-friendly charities. For example,
guns held in trust could be made available for use of a local scout troop.(AB 1511) Once guns are distributed (dynasty trusts are limited to 90 years in California), excess funds (originally from a small life insurance policy funding maintenance of the firearms), if no longer needed, could be donated to a national, state, or local gun organization.
- TRANSMIT OTHER VALUES: A gun trust can also transmit other values important to the family, for example religious or charitable values, career preparation or even financial mentorship. These are all proper objects of incentive trust planning; however incentive planning may conflict with other goals. For example a significant matching funds provision can be at odds with asset protection in the main trust. With the larger sum of assets in the main trust, it is more likely that creative and unconventional incentive provisions will erupt in litigation. A gun trust however, is usually limited in value. The gun trust possesses items of sentimental worth capable of being leveraged for values transmission using incentive provisions, without the usual risk of costly litigation. For more on values transmission, check out our F.I.R.S.T. Family Trust.
- MANAGE RISK: By segregating firearms from the main trust, a gun trust may insulate the rest of the estate from possible tort liability arising from firearm injuries.
In sum, the benefits of having a gun trust in California are many, but the planning must be done carefully.
For example, in transferring guns out of state to escape the so-called “assault weapon” ban:
- Settlor alive, has capacity? No problem.
- Settlor alive, but incapacitated? Better have a fresh power of attorney.
- Settlor tending towards a state of chemical equilibrium? Obviously it will be difficult to have Settlor at the table for the FFL, and since the law is not clear that a trust administration transfer is exempt from the FFL requirement and freedom could be at stake rather than mere tax penalties, you will probably want to ensure that the estate plan has a failsafe mechanism for such transfers (in case California has not clarified the law by then) — for example, a provision in the will mandating that the executor either make the transfer to the successor gun trustee, or create a testamentary gun trust on the same terms as the intervivos gun trust (also, the gun trustee should be required to cooperate with the executor).
A gun trust standing alone is likely to fail if it is not part of an integrated, updated estate plan.
Would your ideal #EstatePlan provide firearm training for generations, with objective testing under time pressure?
— Protective Law Corp. (@guntrust) January 17, 2016