Gun Trusts: Useful tools or subversive legal instruments?

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More than half of the deadliest mass shootings in United States history have occurred within the past decade.  In 2012, Americans were rocked by the news of deadly shootings in Newtown, Connecticut, and Aurora, Colorado.  Tragedies like those that occurred in Newtown and Aurora spark renewed debate about the proper scope of gun restrictions in the United States.  The debate over stricter gun regulation is ongoing, as public opinion is split (forty-nine percent of respondents favor more strict regulation) and lawmakers are also divided.

Current federal regulations restrict the manufacture and sale of certain categories of firearms (including machine guns), silencers, and other “destructive devices.”  One legal construct, commonly known as a “gun trust,” may allow a loophole through which individuals may purchase restricted items.  Gun trusts, however, also offer practical benefits to firearm owners.

There is little difference between a “gun trust” and trusts used in common practice.

There is little difference between a “gun trust” and trusts used in common practice. The parties remain the same; there is a settlor, a trustee, and at least one beneficiary.  With some exceptions, there exist three trust necessities common to all trusts: property (i.e. trust res), definite beneficiaries, and a written instrument.  Not unlike settlors of an ordinary trust, settlors of gun trusts establish such trusts for a variety of reasons, including estate planning, managing assets for minors, and protecting assets from creditors.  Unsurprisingly, one unique characteristic of a gun trust is that the trust corpus—the property for which the trustee is responsible—is comprised of guns.

Gun trusts are also growing in popularity.  The New York Times reports that, in 2008, the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) received 15,000 applications to transfer restricted firearms to trusts or corporations.  In 2012, such requests skyrocketed to 39,000, an increase of 160% over the 2008 figure.

Certain firearms are subject to the stricter regulations of the National Firearms Act.

Two primary sources of law for federal gun regulation are the National Firearms Act of 1934 (NFA) (pdf) and the Gun Control Act of 1968 (GCA).  The GCA served as a revision of the NFA, incorporating and revising certain provisions of the NFA.  Certain firearms—commonly referred to as “NFA firearms” or “Title II firearms”—remain subject to the stricter regulations of the NFA.

There are six basic categories of arms and accessories that are subject to the stricter NFA requirements: (1) machine guns; (2) short-barreled rifles; (3) short-barreled shotguns; (4) silencers; (5) destructive devices; and (6) ”any other weapon” (though this is a bit of a misnomer, and does not actually include any other weapon).  By contrast, Title I firearms—or, “GCA firearms”—include handguns and conventional (long-barrel) rifles or shotguns.

An individual’s path to ownership of a Title II firearm is an arduous one.

An individual seeking to purchase a Title II firearm faces greater challenges than an individual seeking to purchase a Title I firearm.  The transferor of the firearm is required to file a specific form (pdf) with the ATF.  This form must include (1) the identity of the transferor; (2) the identity of the transferee; (3) the fingerprints of the transferee; (4) a photograph of the transferee; (5) the serial number of the firearm; (6) a description of the firearm; and (7) an NFA tax stamp (evidencing payment of a $200 tax).  Finally, the transfer may not be completed without the approval of the “Chief Law Enforcement Officer” (CLEO), in most cases the local sheriff or police chief.  The effect of the latter requirement grants considerable discretion to local officials, whose willingness to approve such transfers varies by jurisdiction.  Because of these requirements, an individual’s path to ownership of a Title II firearm is an arduous one.

There are fewer hurdles to ownership for a trust applicant.

The NFA defines “person” as a “partnership, company, association, trust, estate, or corporation, as well as a natural person.”  As a result, trusts (as well as corporations or other entities) may own and possess an NFA firearm.  Notably, there are fewer hurdles to ownership for a trust applicant.  Unlike an individual, a trust (or other eligible entity) need not supply any fingerprints or photographs.  Presently, there is no background check associated with a trust’s application, while an individual applicant is subjected to a background check.  Additionally, there is no requirement that the trust application be approved by a CLEO.

The New York Times described the special treatment afforded to gun trusts as a “loophole” that might allow firearms to fall into the wrong hands.  Christopher Dorner, a California police officer who engaged in a violent rampage against law enforcement officers last year, apparently acquired restricted items (including silencers) by using a gun trust.  While Dorner was not subject to a background check, the New York Times notes that, as a non-felon, he likely would have passed.  Therefore, it is not clear that the gun trust enabled Dorner to acquire firearms he would otherwise not have been able to acquire by applying as an individual.

The growing popularity of gun trusts and the resulting potential loophole has garnered the attention of both the Obama Administration and the ATF.

The growing popularity of gun trusts and the resulting potential loophole has garnered the attention of both the Obama Administration and the ATF.  Specifically, the Obama Administration warns that “felons, domestic abusers, and others prohibited from having guns can easily evade the required background check and gain access to machine guns or other particularly dangerous weapons by registering the weapon to a trust or corporation.”

The ATF has proposed a change (pdf) that would require “responsible persons” of entities (the trustee, in the context of gun trusts) to provide the same information requested of individuals.  Specifically, the trustee would be required to provide fingerprints and a photograph.  Additionally, the reform would further level the playing field by requiring CLEO approval for trust applicants as well as individual applicants.  The proposed change was posted for public comment for a ninety-day period beginning in September.  Though the ninety-day period has expired, there has not yet been an announcement on the future of the proposed rule change.

There are also many practical and legitimate benefits of using a gun trust.

While there are concerns about the potential abuse of gun trusts, there are also many practical benefits of using one.  Websites of various legal providers across the country tout the numerous legitimate benefits of gun trusts, including estate planning, avoiding future gun regulation, easing the application process, protecting privacy, enabling joint possession and use of Title II firearms, and avoiding arbitrary enforcement of the CLEO requirement for individuals.

Gun trusts are most commonly used in the arena of estate planning.  In this context, gun trusts can be very helpful by providing instructions to surviving parties.  Gun trusts do not insulate from criminal liability a party who otherwise may not possess a firearm under federal law.  For example, a beneficiary who is ineligible to possess firearms due to that beneficiary’s status as a felon does not become eligible merely because he or she is the beneficiary of a gun trust.  As one journalist recently observed in the Wall Street Journal, “[c]reating a trust, a legal entity that holds the guns and is managed by a trustee … for beneficiaries, can help owners properly navigate this thicket of rules.”

One of the inherent criticisms of gun trusts—that it results in a somewhat less burdensome application process—is also a practical benefit according to some practitioners due to the absence of a photograph or fingerprint requirement for trust applicants.  This measure protects the privacy of gun owners who might reasonably oppose registration based on privacy concerns.  Additionally, it avoids potential abuse of discretion by CLEOs, since trust applicants need not seek CLEO approval.

Whether the ATF proposal will be adopted, and whether it will have any effect on diminishing the perceived harm, is yet to be determined.

Debate over gun regulation in the United States will likely continue for the foreseeable future.  For now, there does not appear to be sufficient political will for Congress to make any sweeping changes to federal firearm regulations.  Nevertheless, the Obama Administration may act on its own accord to effect minor policy changes, such as adopting the ATF proposal discussed above.

Whether the ATF proposal will be adopted, and whether it will have any effect on diminishing the perceived harm, is yet to be determined.  In the majority of cases, mass shootings are carried out using firearms other than Title II firearms.  Based on USA Today figures, well over ninety percent of mass shootings were carried out using arms not subject to the stricter NFA standards (including semi-automatic handguns, revolvers, semi-automatic rifles, single shot rifles, and shotguns).  Thus, it is not certain whether the proposed reform would result in limiting access to arms commonly used in mass shootings.  Nevertheless, it is appropriate and commendable for lawmakers and citizens alike to contemplate and discuss measures aimed at preventing tragedies like the ones that occurred in Newtown and Aurora.