FFL vs Trust for NFA items

[ryanmattes]

So I've taken an interest lately in both suppressors and SBRs, and I've been looking at the options.

Used to be they recommended a trust, but with recent changes to the laws, it's about the same level of effort to just apply personally.

For similar effort, I could get an FFL, but that comes with complications. You have to have a commercial purpose, which, sure, I could accept some interstate transfers for people and stuff like that, and I'd like to be able to build ARs and sell them, but I'm not really "in the business" of selling guns. It would be nice to be able to build things with a type 07, but the paperwork alone makes me wary.

The upside of a trust is that I can add my kids to it, and then they're legal to possess the NFA items too, and they can inherit them without all the paperwork. One tax stamp per item and it's done for anyone in the trust. Both of my brother's are shooters, and they might be interested in getting onboard too.

So my question is: who's been down this road, and what do I need to know that I haven't found just by reading a bunch about it?

Pros and cons of each approach that I haven't thought of?

Any experience here would be appreciated.

Ryan

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[Handloader109]

To legally buy NFA items, you have to pay way more than 07 manufacturer. Which is only $90 for 3 years. I'm going from memory, but something on the order of $2500 a year to sell NFA items with an FFL. That isn't a small sum.

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[ryanmattes]

To legally buy NFA items, you have to pay way more than 07 manufacturer. Which is only $90 for 3 years. I'm going from memory, but something on the order of $2500 a year to sell NFA items with an FFL. That isn't a small sum.

Sent from my SM-G892A using TapatalkI'd need to be an FFL to register as an SOT, the $90/yr is only for the FFL. A type 07 FFL would allow me to buy, make, and sell firearms and ammunition, as well as make (but not buy or sell) NFA items.

The SOT would allow me to buy and sell NFA items, and would be $500 annually, but would allow essentially unlimited transfers of NFA items without a tax stamp. So you could register as a Class 2 or 3 SOT for a year, buy 3 suppressors and 2 SBR lower receivers, and pay a total of $500 tax instead of the $1000 you'd pay in tax stamps without the SOT. Once it's registered to you it stays yours even if you let the SOT expire.

I could also build suppressors and SBRs after the SOT expired, I just couldn't buy or sell them unless I re-registered the SOT.

Ryan

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[cwtebay]

I believe that the SOT route should be done if you have an intent to function as such. I believe reading through that particular section of the NFA will discourage you. I have a trust, and have left it as such for all of my NFA items. While I enjoy my NFA items immensely - I don't plan on recouping any of what I spent on them - only passing them along.

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[Txcowboy52]

I know with an FFL , I had one years ago, you will be subjected to random checks from the BATF sometimes by phone sometimes in person. Lots of paperwork and they frown on individuals with out store fronts. I also have a suppressor with a trust . The trust seems much easier and simpler.

[StuBach]

Buddy of mine had a FFL as part of a custom gun business and the paperwork alone was a nightmare from what he told me. Ended up losing the FFL due to improper records by his partner and that was not a fun process. Lots to do and follow so if you go that route with anyone else attached be cautious and make sure they stay on top of everything as you would.

On the flip side, gun trusts can be tricky, especially for NfA items, and only some attorneys can draft them properly. There are attorneys who specialize in just that so I would advise being careful who you pick to draft it if you go that road. As I understand it, most state BAR associations have public records on attorneys that you can review for complaints against an attourney. Can give a good indication on quality of candidate you’re looking at. (If there is an estate planning attourney on the forum please correct me if I’m wrong in any of this, I am not an Attourney nor should you take what I say as legal advise, just nuggets I’ve picked up along the way dealing with my dads collection and him dealing with his friends’).

I have no interest in such items but still plan to have a gun trust drafted once I have a chance to sit down with prettier half and iron out the details.

[FISH4BUGS]

I have just gone through this and decided to will specific items (by s/n and model) to my kids. A trust is a PITA. When you croak, the guns, etc. go directly to the beneficiaries as noted in the will....tax free.
No muss no fuss.

[buckwheatpaul]

I got a suppressor last year. I did not do the trust. I was told that you can will the suppressor and it only costs $50.00 plus a background (free). This came from ATF who deal with NFA issues.

[Finster101]

I have one that is in a trust (required at the time) and one that is not. When I get another (and I will) it will not be in a trust. As stated above just make sure the paperwork is done correctly should something happen to you.

[Rapier]

Suggest that you check all of the ATF rules before you jump in the deep end on deciding how to own or transfer any NFA item. How it can be transferred, whom is required to go through background checks, photos and fingerprints.

[kbstenberg]

I am in the thinking about it stage. What is the cost of getting a trust or other forms required to get a suppressor?

[Finster101]

A trust is no longer required to get a suppressor.

[ryanmattes]

I am in the thinking about it stage. What is the cost of getting a trust or other forms required to get a suppressor?You can set up the trust online now. There are services that will do all the paperwork, send it to you to sign, you send it back and you're set up. They'll put together all the stuff for you to submit to your state and the forms for the ATF too. They advertise that they'll do it all for like $60, but having not tried it I can't vouch for that.

And since you have to keep the trust paperwork with the tax stamp and the rifle, they'll shrink the trust cert down and laminate it all to wallet-sized.



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[contender1]

The best advice is to contact a lawyer,, who specializes in firearm trusts. Especially NFA items. I'm very fortunate to have just such a lawyer,, because he's heavily into NFA items & such.
The expense of a good lawyer is PRICELESS to your family in the event of an untimely passing.

Internet advice isn't legally binding,, but a legal document, filed by an attorney,, versed in YOUR state laws along with knowledge of Federal laws about such matters is the BEST option.

A discussion with one of them about your wishes & how trusts & wills are set up will get you much better advice.

[StuBach]

An estate planning attourney I know advised using www.estateplanning.com to source a good attourney. This is a well known and reputable site that offers resources and info for all of the US and territories.

[kerplode]

A trust is no longer required to get a suppressor.

A trust never was required...It used to make the process easier, but it was never required.

Prior to 41P, it was not required that an application to transfer an NFA item to a trust contain photographs, fingerprints, or CLEO approval. Since a trust is a non-person entity, no background check was done during the transfer approval process.

After 41P, all "responsible persons" of the trust (i.e. trustees) must submit photos and fingerprints for examination during the approval process. CLEO approval is no longer required for any application, but has been replaced by CLEO notification for all applications.

The trust still provides one significant benefit over individual registration, however. If you individually register, ONLY YOU are allowed to possess the item...Can't loan it, can't let your wife or adult kids take it to the range without you being present, and can't give anyone access to your storage location for the item. With a trust, any trustee has full legal access to the items. You can add anyone that isn't prohibited as a trustee and they get granted full access to use and possess all of the items owned by the trust. This reason alone is worth the price of admission, IMO.

I will strongly second the suggestion to have a lawyer versed in NFA trusts create one for you, though. It'll cost a few hundred dollars (mine was $350, IIRC), but you'll have smoother transfers and less potential for issues down the line. They'll also structure it correctly so that it's relatively painless to add and remove trustees along the way, which is important.

Getting a FFL and SOT is fine if you actually intend to go into business manufacturing and selling firearms, or if you have a desire to turn money into noise by making post-sample machineguns. Could be a decent business if you're so inclined. But AFT does require that you have a business intent...You can't get an FFL and then just use it only to support your personal hobby (well, you probably could for a while, but they'd likely pull your license once they looked at your books and saw that you weren't actually making any money). Doing a few transfers for people here and there would probably tick that "business intent" box, though.

But as a way to just get a couple cans, it seems like using a ballistic missile to swat a fly...There will be a ton more paperwork in the end plus all the compliance drama and ATF book inspections and taxation complications that come along with it. Anyway, a $300 trust seems way easier to me, but you do you.

Edited to add: You can certainly get an FFL as a sole proprietor, but I would never do that as you have zero liability protection that way. If your business is sued for any reason, you can ,and likely will, lose everything. Much smarter to form an LLC for the FFL so you have some form of liability umbrella protecting your personal assets.

[Fishman]

Anybody use Silencer Central? They are supposed to handle the trust paperwork for you for free. Seems like a good deal.

[ryanmattes]

https://www.nationalguntrusts.com/

Is another one I've looked at. Seems enough people are doing this now that they've standardized the paperwork.


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[HATCH]

After 41P, all "responsible persons" of the trust (i.e. trustees) must submit photos and fingerprints for examination during the approval process. CLEO approval is no longer required for any application, but has been replaced by CLEO notification for all applications.

The trust still provides one significant benefit over individual registration, however. If you individually register, ONLY YOU are allowed to possess the item...Can't loan it, can't let your wife or adult kids take it to the range without you being present, and can't give anyone access to your storage location for the item. With a trust, any trustee has full legal access to the items. You can add anyone that isn't prohibited as a trustee and they get granted full access to use and possess all of the items owned by the trust. This reason alone is worth the price of admission, IMO.



I have a trust for the majority of my NFA items. The ones that aren't on a trust were purchase long before I had kids and didn't think about it.
As mentioned above it does allow for multiple people to have access to your NFA items provided they are listed as a trustee.
In my case, currently my oldest brother, my wife and myself have access to my NFA items. Initially it did cover my dad and my second oldest brother also but I removed them with a amendment. My son just turned 18 so I will be adding him to my trust in the next few months (when I get around to it)

Lets talk about responsible persons and trusts. Please review my wording carefully.

At the time of application for your form (1 or 4) any person you have listed as a trustee MUST submit fingerprints and photos.
This is a requirement.
However, one of the advantages is that trusts can be amended at any time for any reason and the ATF doesn't have to get notified. The only time the ATF know what trustees are on your trust is when you file your initial paperwork (form 1 or form 4).

Trustees can be added or removed as quickly as it takes for you to print out the form and sign it.
So it is possible to have a trust with only 1 person on it, YOU. So only you have to submit fingerprints and only you have to submit a photograph.
You can make a amendment at a later time adding the trustees just like you can make a amendment removing them.

What happens when you die to your NFA items that are in your trust??? - you have a schedule of beneficiaries and you can list either %'s or you can list individual items.
I have individual items listed for stuff my brother has and I have %'s listed for the rest.

This is the only issue you have with a trust.
Anyone listed as a trustee can sell any item in the trust provided they have the trust paperwork and a copy of the ATF form (form 1 or form 4).
So make sure you trust people in your trust.

I used the $99 gun trust several years ago. The bulk of my trust NFA items are Form 1 items (short barrel rifles and suppressors). I do have a couple form 4 commercial cans.

[ryanmattes]

However, one of the advantages is that trusts can be amended at any time for any reason and the ATF doesn't have to get notified. The only time the ATF know what trustees are on your trust is when you file your initial paperwork (form 1 or form 4).

Trustees can be added or removed as quickly as it takes for you to print out the form and sign it.
So it is possible to have a trust with only 1 person on it, YOU. So only you have to submit fingerprints and only you have to submit a photograph.

You can make a amendment at a later time adding the trustees just like you can make a amendment removing them.


My understanding was that in order to be added to the trust, you had to submit fingerprints and passport photos. Is that not correct?

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[HATCH]

My understanding was that in order to be added to the trust, you had to submit fingerprints and passport photos. Is that not correct?

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I sent you a PM with my cell number. I am heading to bed in a 1/2 hr as the weekdays are long.
The ONLY time fingerprints or photographs are submitted is when you are submitting a form (either form 1 or form 4)
As mentioned above, ANYONE that is listed as a trustee at the time of form submission MUST fill out a F5320 Responsible persons questionnaire. Basically its the same questions as what you fill out on a 4473 when you purchase a firearm. They must also submit fingerprints and a photo.

-Story time -

My son turned 18 last month. Legally he is able to posses short barrel rifles and suppressors that are owned by the trust.
The only thing I have to do to add him as a trustee is to make a amendment, print it and sign it. It isn't filed anywhere. I don't have to send anything to the ATF. Nothing but doing the amendment.

-end of story time -

I can discuss this more over the phone if you like.

[Multra]

ITAR is required to (legally) operate as an 07 FFL, it's on the order of $2k/year.

[kerplode]

I have a trust for the majority of my NFA items. The ones that aren't on a trust were purchase long before I had kids and didn't think about it.
As mentioned above it does allow for multiple people to have access to your NFA items provided they are listed as a trustee.
In my case, currently my oldest brother, my wife and myself have access to my NFA items. Initially it did cover my dad and my second oldest brother also but I removed them with a amendment. My son just turned 18 so I will be adding him to my trust in the next few months (when I get around to it)

Lets talk about responsible persons and trusts. Please review my wording carefully.

At the time of application for your form (1 or 4) any person you have listed as a trustee MUST submit fingerprints and photos.
This is a requirement.
However, one of the advantages is that trusts can be amended at any time for any reason and the ATF doesn't have to get notified. The only time the ATF know what trustees are on your trust is when you file your initial paperwork (form 1 or form 4).

Trustees can be added or removed as quickly as it takes for you to print out the form and sign it.
So it is possible to have a trust with only 1 person on it, YOU. So only you have to submit fingerprints and only you have to submit a photograph.
You can make a amendment at a later time adding the trustees just like you can make a amendment removing them.

What happens when you die to your NFA items that are in your trust??? - you have a schedule of beneficiaries and you can list either %'s or you can list individual items.
I have individual items listed for stuff my brother has and I have %'s listed for the rest.

This is the only issue you have with a trust.
Anyone listed as a trustee can sell any item in the trust provided they have the trust paperwork and a copy of the ATF form (form 1 or form 4).
So make sure you trust people in your trust.

I used the $99 gun trust several years ago. The bulk of my trust NFA items are Form 1 items (short barrel rifles and suppressors). I do have a couple form 4 commercial cans.

Exactly...Above is 100% correct. And I completely agree with your comment about only adding those you trust to your trust. IIRC, the only thing a non-grantor trustee can't do is dissolve the trust completely.

My form to add trustees has two spots for the new trustee to sign...One spot to accept becoming a trustee and one spot to resign. For the resignation, there is a spot for me to sign to accept said resignation. So, when I add someone, I have them sign both the acceptance and resignation at the same time. Then, if it becomes necessary later, I can unilaterally remove them by signing and dating my acceptance of their resignation. But as long as I haven't accepted their resignation, they are a valid trustee. (I hope that makes sense...I'm not sure I described it well...)

[kerplode]

My understanding was that in order to be added to the trust, you had to submit fingerprints and passport photos. Is that not correct?

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As Hatch stated, it is not required to submit anything when adding trustees (as long as you don't alter the trust while a transfer is pending).

From the ATF's Q&A related to 41F:
298003

You can find the doc I snipped that out of here:
https://www.atf.gov/rules-and-regulations/final-rule-41f-background-checks-responsible-persons-effective-july-13

So when you want to add something new to the trust, you can remove all trustees but yourself ahead of time, then add everyone back after the transfer is approved. As long as you're not buying tons of NFA stuff, then it's not too much of a hassle.

[ryanmattes]

ITAR is required to (legally) operate as an 07 FFL, it's on the order of $2k/year.That has either been changed, or there's a proposed change in process. The proposed change was to limit it to dealers in listed military equipment, and excludes weapons in common use.

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[HATCH]

So when you want to add something new to the trust, you can remove all trustees but yourself ahead of time, then add everyone back after the transfer is approved. As long as you're not buying tons of NFA stuff, then it's not too much of a hassle.

I have only added items once and it was five items done at the same time (all form 1). I did a amendment removing all trustees.
Then once I got all my approvals, I did a amendment voiding all previous amendments, changed the trust address, and removed two trustees. I shredded the first amendment.
The only issue that I run into is that some items are stored at a alternate location (atf 5320.20 form) and basically the trustee loses access to them while the additions are in process (typically less then 30 days for a form 1)

What is more of a hassle, getting fingerprints and photos of your trustees or doing a amendment???

[kerplode]

What is more of a hassle, getting fingerprints and photos of your trustees or doing a amendment???

Well, like I said, it depends on how often you're buying things. You did yours all at once, so it was one amendment. If you had spread them out so that they were all a year apart, you would have had to do a bunch of amendments...Either that, or you would have had a trust with no other trustees for a long period of time, which could be a problem depending on your exposure for constructive possession by your now-no-longer-trustee family members. Maybe neither of those are a big deal, but for some they might be. Just pointing out that it could be a potential headache for some. Perhaps for someone who is a frequent buyer and has one or two trustees, maybe it's easier to just leave them on and submit fingerprints/photos...

But fundamentally, I think we're arguing the same point here...A trust is a cost effective and flexible path to NFA ownership.

[Multra]

That has either been changed, or there's a proposed change in process. The proposed change was to limit it to dealers in listed military equipment, and excludes weapons in common use.

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The change went through, the state department is ignoring it. If you call them up they will send you the old rules and tell you that is what they are operating under.

[Bentstick]

Anybody use Silencer Central? They are supposed to handle the trust paperwork for you for free. Seems like a good deal.

yes it was not without issue because of a ATF change in a policy but the trust was done and accepted, just waiting for approval all paper work submitted 2-04-2022 the second time, when issue arrived and I got the denial e-mail I had a phone call from Silencer Central within 24 hrs and things were done again and resubmitted so just humbly setting by awaiting, they are very easy to work with and pleasant to talk to on phone if you have ?'s or problems, so far a pleasant dealing with them, the Trust was free with purchase IIRC