Trust Question

W

Willie Sutton

Moderator
Thinking about Trusts... if you set up a discrete trust for each NFA weapon, would it not be true that the trust could then be transferred from one person to another "ad infinitum" without any further BATF involvement?

What's preventing a vibrant "non BATF involvement transfer" market for NFA items by simply changing trusteess whenever a "transfer" is desired? Transfer it into a dedicated trust once, and the change trustees as desired.



Willie


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In theory yes. In practice it probably wouldn't be all that smart. The ATF does need to be notified when the location / address of the firearm changes but that's about it.

What's preventing a vibrant "non BATF involvement transfer" market for NFA items by simply changing trusteess whenever a "transfer" is desired? Transfer it into a dedicated trust once, and the change trustees as desired.
Click to expand...

Guessing on the answer to your 2nd question:
1. Folks that go to the trouble of setting up a trust and buying NFA items likely want to keep them and pass them down to family when they die
2. Most (maybe) folks register as individuals
3. Someone would want to be reasonably sure the new trustee was legally allowed to be in possession of a firearm. If the firearm was ever used in a crime the paper trail would likely lead back to the person that setup the trust originally and I am not sure how to explain to the ATF how a "Fred Brown" came to be a trustee of the trust and therefore in possession of the trust property.
4. Someone wanting NFA items will likely want to do things themselves to ensure they are doing things legally. Doing what you suggest could be a problem for both parties
5. No one would pay more to buy an existing trust than it would cost to setup the trust themselves and buy the items in question so I don't know what the benefit would be other than saving on waiting 6 months for a stamp.
 
6 month wait and $200 saved... I was just thinking of being able to move a trust between a group of guys who are (club members, friends, associates, fill in the blanks) so as to make it easy to (lend, swap, trade) their collections. Not transferring the Trust to a third party that is an unkown.

I've put airplanes into LLC ownerships, and when they are sold, we do not do a FAA ownership change, we just change the Members of the LLC. No sales tax... etc. Not a "sale", a change of members. Makes it cheaper and keeps it easy.


Willie

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That concept would likely be fine for NFA items. Everyone would need a copy of the form 1/4 and probably a copy of the trust.
I would probably have an attorney that knows NFA draft the trust and let him / her know what you plan to do.
 
You can't "sell" a Trust like a sole shareholder can sell a corporation or LLC. They are completely different animals. Trustees have a fiduciary obligation to the beneficiaries. States trust laws revolver around this concept.

If a Trustee tries to sell the trust together with its assets by taking money to change the names of the trustees and perhaps even the beneficiaries, that trustee would be acting contrary to most states' trust laws. If BATFE got wind of this, they would have good grounds to have the trust declared invalid and then possibly confiscate the trust assets. In my opinion, this is about as advisable as owning one company that sells "Pre-81" DIAS's and another company that sells M16 parts sets.:eek:

Willie raises a good point about LLC's. I can't think of anything that would prohibit someone from selling an LLC with NFA items in it - seems like all you would need to do is notify BATFE on the location of the items and possibly the name of the new manager. If this can be done, you might be able to avoid the $200 transfer tax per NFA item.

I've put airplanes into LLC ownerships, and when they are sold, we do not do a FAA ownership change, we just change the Members of the LLC. No sales tax... etc. Not a "sale", a change of members. Makes it cheaper and keeps it easy.
Click to expand...

Ditto with real estate to avoid transfer taxes, however, the State has caught onto this and I believe has plugged that "loophole".
 
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