NFATCA Report: Beware of the Busted Trust
By John Brown

During the spring and early summer, NFA transfer questions came to the NFA-TCA by the hundreds. I am always amazed at the sheer number of individuals that are not only given, but gladly take, bad advice in their quest to find yet another shortcut to getting an NFA item. In many cases it is under the guise of trying to save a few dollars; knowing all the while that the process is risky. Let’s put a fine point on this: there are no shortcuts. The quickest and most efficient way to transfer an NFA item is to do it correctly, completely and legally - the first time.

An NFA Revocable Trust, plain and simple, is a legal instrument designed to protect specific assets, especially in the event of your untimely demise. It is also a sophisticated legal instrument that can have an enormous impact upon whether or not you stay on the right side of the law. Why on earth someone would want to entrust that protection to a process that has been intentionally short cut, is beyond me. I have seen examples of trusts that have been copied from someone else’s trust or have been downloaded from some web site where there are no checks and balances on making certain that what you are getting will comply with state laws and will properly serve your estate. The short story here is when it comes to a document that may very well have to stand up in court, never anoint yourself as a lawyer, especially if you don’t have the training.

The NFATCA has seen just about every conceivable shortcut attempt that you can imagine and almost every single one of those transfers’ attempts gets bumped back to the dealer for a variety of reasons. This year has seen a huge increase with this problem. Virtually four out of five trusts get bumped back because it was simply an improper trust. What amazes me even more is the fact that the transferee expects the dealer to decipher what the specific problem is and give them advice on how to solve it. Your dealer is most likely not an attorney and even if he or she is, is most likely not a trust attorney. If your dealer is not a lawyer and he is selling you or even giving you a blank trust form document for you to “cut and paste” then a crime is being committed: unauthorized practice of law (UPL). It’s the same crime if he or she is creating a trust for you on the shop computer connected to the Internet or running Quicken. Not using a reliable attorney that knows and understands the laws in your state is risky business and will guarantee you a recipe for problems.

Trust transfers represent such a large portion of current transfer requests that the NFA Branch has been forced to train all of the examiners on what to look for in a trust that is legitimate and will pass the initial muster. Since our examiners are not lawyers they must depend on a variety of solid guidelines as to what is acceptable and what is not according to ATF counsel. I remember the days when virtually every trust came through with flying colors... Those days are gone! With prohibited persons actually obtaining NFA items through trusts, thus avoiding the law, the NFA Branch has had to tighten up, take a closer look at each trust document, and make certain that the trust document is structured according to all legal requirements. Needless to say this is a tough assignment for our examiners and requires yet another level of checks and balance that have never been required by the system. And it goes without saying that this additional work load has an impact on turnaround times.

I want to make it clear at this point that the NFATCA believes in the trust process as a rock solid method of protecting your assets, let alone the fact that it provides a work-around for CLEO issues, such as the law enforcement agency that still thinks they are approving a Form Four. It is at this point that we would like to point out that the individuals that are shortcutting this process and adding yet another level of hardship to the NFA Branch must remember one thing and only one thing: The problems that are being created are jeopardizing this process for everyone else. The NFA Revocable Trust is an invaluable asset to any NFA owner and should be coveted as a privilege that provides many benefits. Why abuse such a wonderful privilege? Unfortunately we all know that given an opportunity to gain an edge, it is inevitable that someone will take advantage and spoil the opportunity for everyone else.

Earlier, I mentioned that ATF Counsel has given some fairly strict marching orders with regard to trust review. In fact, these marching orders are, essentially, a punch list that each examiner uses to establish the validity of the trust document before them. And if there is the slightest whiff of uncertainty, the trust gets bounced. Keep in mind that since the examiners are not lawyers, they do not have the authority to give you advice on what you did wrong! Folks, if the trust is not valid, and an NFA item has been or gets transferred into it, then an illegal transfer has occurred. That is a federal offense. Some folks who had trusts sail through before are now discovering that they no longer work. These people, in particular, should have even more concern than the rest of us because they might already be in possession of an illegally transferred item. This issue has stunningly huge implications.

As part of NFATCA member services, we try to guide our members through this ever-changing landscape. We give them information that has been validated against ATF opinion and practice. We help them to do it right the first time. For less than the price of a weekly coffee, you can help us help you. In the meantime, here is your very own NFATCA Trust Buster Checklist:

  1. Our best advice is to hire a competent attorney that is familiar with your state’s trust laws.
  2. Internet templates and services are frequently not as up-to-date as one would hope. Further, the nuances of NFA item ownership are not even present. Generic asset trusts may not be appropriate. The same holds true for many off-the-shelf software packages.
  3. Beware of dealers practicing law, even those who are doing so without even knowing it. You tend to get what you pay for.
  4. Avoid cutting and pasting of an already existing trust. You will likely not know the where, when and how of the original trust, which means it probably will not work for you.
  5. Make sure that your trust:

  • Is validly constituted in the state in which you reside.
  • Is properly funded.
  • Has the beneficiary(ies) properly designated.
  • Has the successor(s) properly designated.

Look at it this way: You are building a vehicle that is supposed to keep you from paying hefty fines or going to jail. For most folks, that’s a big deal. Now is not the time to fill the tank of this vehicle with cheap gas.

Come join the NFATCA today by visiting us at www.nfatca.org.

This article first appeared in Small Arms Review V14N1 (October 2010)
and was posted online on March 2, 2012


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