A NFA Specific Trust vs. Any Other Entity

I am commonly asked if a clients pre-existing business entity or family trust can be used to acquire NFA firearms rather than establishing a separate trust specifically for this purpose. Yes of course the entity can be used to acquire NFA firearms, but that doesn’t make it a good idea.

A purpose specific NFA Trust is designed to inform the Trustees of their duties regarding the NFA firearms. Safeguards are built into the trust to prevent mistaken transfers, revocations, or other actions that may cause a violation of the NFA. In a generic, pre-existing entity, these safeguards will not exist. Additionally, there will be no guiding instructions to the Trustees disclosing to them how to treat the firearms after your death. This leaves a potential liability to loved ones without guidance on how to navigate the NFA.

A purpose specific trust also limits potential liability of accidents that may occur with the firearm. While we don’t wish to think about it, occasionally accidents do happen with NFA firearms. By using a separate Trust, you can limit some of your liability if an accident should happen while another Trustee is using the firearm. Liability is a fact intensive area of the law, and if you wish to know more about a certain scenario or just want to discuss the issue in general, you should contact an attorney on this matter.

Perhaps the single biggest benefit is flexibility. Only the trustees of a trust, or officers and employees of a company, may possess NFA firearms owned by the trust or company. If you shoe-horn a NFA firearm into a pre-existing entity you will not have the ability to custom pick who can posses the firearm without affecting some other aspect of the entity. You may want your son to be able to borrow your silencer, but would you trust him to run your business? Or you might want to loan your Short-barreled rifle to your best friend, but do you want him to decide how to divide your estate after your death? When making a pre-existing entity perform double duty these are just some of the problems you may have.

There is much to think about if you wish to add NFA firearms to a pre-existing entity. Most of the time, the simplest and safest path forward is to establish a purpose specific NFA Firearms Trust. This gives you ample flexibility to decide who can use the firearm without affecting your estate plan or your company, and it provides guidance to your Trustees and family to prevent an inadvertent felony with a NFA Firearm. If you are trying to decide if a purpose specific NFA Trust is right for you and want advice from a South Carolina attorney, please give me a call.