PROS or CONS: Gun Trusts and C&R Licenses

[Lawman9328]

As a newer owner of a TSMG, when trying to learn as much as I can about owning a Thompson I've frequently heard or read stuff about Gun Trusts and C&R Licenses for collectors and Class III owners.

Most of the information I've gathered seems to indicate a positive opinion of gun trusts and a so-so opinion of the C&R Licenses for TSMG owners

I'd be interested in any insight folks here on the board would be willing to provide.  Are they both definitely a good thing or are there hidden negatives that I need to consider before moving forward with either of these ?

Thanks in advance.

[brveagle]

I can't speak towards a trust, but a C&R license is almost a must have. Don't need to notify the ATF to cross state lines. When buying a thompson out of state, you do not need a dealer in your state to be the go-between. Plus it's like $30 for three years. 

[Doug Quaid]

Back in the old days, you had to get a local law enforcement official to sign off on your application if you did an transfer as an individual.  And you had to submit fingerprints and a photo.  

Somebody eventually realized that these NFA guns could also be transferred to a trust, which circumvented the law enforcement sign-off and the finger prints and everything.

So using a trust became this huge thing and everyone was hooting and hollering about how great trusts are.  Everyone was making their own trusts on Quicken WillMaker and so forth.  The internet was flooded with plumbers and fry cooks and dentists explaining to each other their dim understanding of the legal minutia of trusts.

Personally, using a trust is of no advantage to me, so I never used one.   And I would never put a $30,000 firearm into a legal document that I made myself off of some computer program.  

The law enforcement sign-off has been removed from the transfer application, and trust members all need to submit finger prints and photos now, so the benefits are somewhat slim.  Trusts do have certain advantages for estate planning and so forth.

There is no reason to not get a C&R license.  It's like $10 per year. 

I had my Thompsons transferred directly to me on my C&R license.  From a dealer in New Jersey if you can believe that.  It's a great way to cut out the cost and wait of using a transfer dealer in your state, if the guns are coming from out of state.



 

[TD.]

Gun Trusts and a C&R License are two different animals. Doug Quaid provides an excellent overview of the past history of Trusts. If you think you want to put your assets in a Trust, sit down with an attorney who specializes in firearm Trusts and explain to them why you want one. This can happen on a Zoom call. They will be able to explain to you the pros and cons of a gun Trust and the responsibilities you and the other trustees have to follow. You may find a Trust is a perfect vehicle. Or not. It will be money and time well spent, especially when you pass and this asset(s) is now under the purview of BATF if the remaining trustees want to sell, or decide who keeps the asset in their safe, or one of the trustees falls out of favor. These questions need to be answered before you make a decision.

A C&R license is cheap enough but there are some requirements for maintaining the license. I have heard that if you have a C&R license, you do not have to file the Forms 5320.30 when you want to take your C&R machine gun out of state. But I have never seen that provision in writing on the ATF website or documentation. It is true that a C&R machine gun can transfer directly to you from an out of state owner or dealer. But the wait times from BATF for a C&R license holder vs a normal Form 4 transfer to an individual appear to be the same. If I was buying a machine gun from a well-known dealer who had been in business for a long time, I would probably let them hold the machine gun for 9 plus months until the transfer was approved. If I purchased the machine gun from an individual, estate or a part time or less known dealer out of state, I would have it first transferred to a dealer close by in my state. The cost for this transfer is minuscule compared to the purchase price of any machine gun. Too many bad things can happen in the 9 months plus waiting period to your out of state machine gun, i.e., owner or dealer could die, a fire in their home or office, theft, or simply the seller could decide to shoot it one last time. If I am spending $25,000 plus for a machine gun, I would normally want it close by in a location of my choosing during the transfer period.   

[GUNGUY45]

One of the advantages of a trust is that a trustee may possess the firearm.

If you own it as an individual you must be in possession of the firearm. That means it's only going to the range with you.

A firearm owned by a trust may be taken by any trustee.

If you want other people to be able to possess the firearm alone, then it's a good idea.

It's mostly used for Fathers, Sons, Daughters, Wives, & trusted friends, etc.

That said, mine are individually owned.

[ppgcowboy]

What have you heard that is a negative about having a c&r? I would like to hear it?

Edited February 23, 2024 by ppgcowboy

[Bridgeport28A1]

6 hours ago, TD. said:

Gun Trusts and a C&R License are two different animals. Doug Quaid provides an excellent overview of the past history of Trusts. If you think you want to put your assets in a Trust, sit down with an attorney who specializes in firearm Trusts and explain to them why you want one. This can happen on a Zoom call. They will be able to explain to you the pros and cons of a gun Trust and the responsibilities you and the other trustees have to follow. You may find a Trust is a perfect vehicle. Or not. It will be money and time well spent, especially when you pass and this asset(s) is now under the purview of BATF if the remaining trustees want to sell, or decide who keeps the asset in their safe, or one of the trustees falls out of favor. These questions need to be answered before you make a decision.

A C&R license is cheap enough but there are some requirements for maintaining the license. I have heard that if you have a C&R license, you do not have to file the Forms 5320.30 when you want to take your C&R machine gun out of state. But I have never seen that provision in writing on the ATF website or documentation. It is true that a C&R machine gun can transfer directly to you from an out of state owner or dealer. But the wait times from BATF for a C&R license holder vs a normal Form 4 transfer to an individual appear to be the same. If I was buying a machine gun from a well-known dealer who had been in business for a long time, I would probably let them hold the machine gun for 9 plus months until the transfer was approved. If I purchased the machine gun from an individual, estate or a part time or less known dealer out of state, I would have it first transferred to a dealer close by in my state. The cost for this transfer is minuscule compared to the purchase price of any machine gun. Too many bad things can happen in the 9 months plus waiting period to your out of state machine gun, i.e., owner or dealer could die, a fire in their home or office, theft, or simply the seller could decide to shoot it one last time. If I am spending $25,000 plus for a machine gun, I would normally want it close by in a location of my choosing during the transfer period.   

https://www.atf.gov/firearms/national-firearms-act-handbook

Tom, look at Section 13.8 of the BATFE National Firearms Act Handbook

 

 

[TD.]

Ross,

+1. Thank you for providing documentation. 

[JSDKMS]

Just an FYI - We are a Class 3 dealer and have not had anyone buy a Class 3 item in over 5 years using a trust.

[Got Uzi]

Plus not all trusts are not setup the same. My wife is a lawyer and she has dealt with all sorts of trusts and estates, many leave a lot to be desired. To me a trust is more cost, more headache, and less reward….that being said I HATE doing paperwork for someone buying an NFA item on a trust…its more work for the dealer and no more money. 

[Doug Quaid]

On 2/23/2024 at 8:15 PM, JSDKMS said:

Just an FYI - We are a Class 3 dealer and have not had anyone buy a Class 3 item in over 5 years using a trust.

interdasting

I'm surprised.   I wonder what the actual percentage is industry-wide now.

[Rekraps]

On 2/23/2024 at 8:15 PM, JSDKMS said:

Just an FYI - We are a Class 3 dealer and have not had anyone buy a Class 3 item in over 5 years using a trust.

I too find that interesting as all my NFA items are in a trust.

[Lawman9328]

My original post was more about putting my TSMG into a trust in order to prepare for the very unlikely event that I pass on ?

I've heard several people say that a trust makes it easier for someone else in the trust to take over ownership.  It is doubtful that I would use the Trust to purchase additional firearms (although I am curious as to why that makes it more difficult).  In the unlikely event I did purchase additional firearms down the road, I would think it would be easier to just purchase them myself and then add them to the trust (or is that a problem ?)

Does anyone know if "Gun Trusts" are any different than a regular trust ?  Yeah, I know the obvious.....gun trusts have guns in them, but are there any other details that make them different regarding paperwork, who can be in the trust, etc ?  Can "non-gun" related items be part of a "gun trust" ?  Just trying to get as much free advice before I shell out money for a lawyer !!

[SP Sarge]

The downside of purchasing class 3 items separately, and then adding them to the trust later is you will pay a $200 NFA tax again per item to add each of them to the trust. 

[Chip]

I don't know anything about these folks except I've been looking at their website.  You might find it interesting.

https://www.nationalguntrusts.com/

 

 

[Rekraps]

2 hours ago, SP Sarge said:

The downside of purchasing class 3 items separately, and then adding them to the trust later is you will pay a $200 NFA tax again per item to add each of them to the trust. 

Exactly. The reason I use a trust is so my kids get the stuff hassle free.

[Doug Quaid]

On 3/8/2024 at 5:09 PM, Lawman9328 said:

My original post was more about putting my TSMG into a trust in order to prepare for the very unlikely event that I pass on ?

I've heard several people say that a trust makes it easier for someone else in the trust to take over ownership.  It is doubtful that I would use the Trust to purchase additional firearms (although I am curious as to why that makes it more difficult).  In the unlikely event I did purchase additional firearms down the road, I would think it would be easier to just purchase them myself and then add them to the trust (or is that a problem ?)

Does anyone know if "Gun Trusts" are any different than a regular trust ?  Yeah, I know the obvious.....gun trusts have guns in them, but are there any other details that make them different regarding paperwork, who can be in the trust, etc ?  Can "non-gun" related items be part of a "gun trust" ?  Just trying to get as much free advice before I shell out money for a lawyer !!

I enjoy reading technical topics.  I read engineering textbooks just for the heck of it.  

I read endless internet discussions, and various legal websites about trusts, back when the whole trust craze kicked off.  

I even bought Quicken Will Maker and made a gun trust.  

From all that reading I did, I know absolutely NOTHING about gun trusts. 

So I came to a decision - either pay a lawyer to do a proper job of creating a trust, or don't use a trust.

One thing I DO know, from having been a contractor for the government for 30 years, is that when you deal with the government, you want everything to be extra super PERFECT.   Because if any little tiny thing is WRONG or even LOOKS WRONG, you can spend 10 years wrangling with bureaucrats over it and they COULD NOT CARE LESS whether they are right or wrong.  Or whether you are going broke on lawyer's fees.

If I was going to use a trust, I would find an actual competent lawyer with plenty of experience making gun trusts and pay him or her to do the work properly.  Just my $0.02.



 

Edited March 10, 2024 by Doug Quaid

[TD.]

+1 for Doug Quaid.

All National Firearm Act (NFA) weapons are valuable; some much more than others. And these NFA weapons, important family assets to most people, don't move or don't pass GO without government approval. If you are going to use a Trust for ownership, find an experienced attorney that specializes in NFA Trusts. It will save money and headaches for the heirs or other Trustees in the future. Forming a Trust for valuable assets is not a place to bargain shop for the lowest price.  

[Doug Quaid]

I'm an engineer, and sometimes I have to do two sets of calculations:  one that conforms to the state design manual, and one that's done correctly for my records.

The state design manuals are these ancient crusty piles of garbage that 100 different state guys slowly modified, so eventually they're full of weird errors.  Like two different design methodologies that were combined together by someone who didn't understand either.

It's basically impossible to get them to change the manual, so you just do a work-around.   We have thin budgets and we simply cannot spare the time.

I already had a big wrangle with ATF - they wanted me to list my MAC10 as 45acp on the paperwork, but it was a dedicated 9mm.  Eventually, I had to send them photos.  But it was too complicated, so I kept resubmitting my letter, making it simpler and simpler each time.  Eventually the letter was just three lines long with 3 photos and that finally worked.

The government is like quicksand.   You step a foot in it, and bloop!





 

[reelbusy2]

Why no discussion of using an LLC to buy and hold a class 3 weapon?  I’m a lawyer, but anyone can form an LLC himself.  Mine is a single-member LLC, so no operating agreement or EIN required.  I can later add members to facilitate transfer at death.

 

 

[Merry Ploughboy]

1 hour ago, reelbusy2 said:

Why no discussion of using an LLC to buy and hold a class 3 weapon?  I’m a lawyer, but anyone can form an LLC himself.  Mine is a single-member LLC, so no operating agreement or EIN required.  I can later add members to facilitate transfer at death.

 

 

Annual fee to maintain LLC.  May also encounter local zoning restrictions.

[reelbusy2]

$10/year in Colorado.  No tax return required if single member.

[johnsonlmg41]

On 3/11/2024 at 7:45 AM, reelbusy2 said:

Why no discussion of using an LLC to buy and hold a class 3 weapon?  I’m a lawyer, but anyone can form an LLC himself.  Mine is a single-member LLC, so no operating agreement or EIN required.  I can later add members to facilitate transfer at death.

 

 

That is what I do generally or individual.  The odds of adding trustees after death is a problem and we've seen trusts voided when no trustees are listed and there is a death, thus no one authorized to make a transfer.  There is also many other trust related issues in addition to heirs paying the tax to get an item out of a trust vs. a tax free form 5.  Most suppressors, sbr's, etc.  will die with a trust and eventually fall into "trust limbo".  Then there will be the whole issue of a trustee doing a transfer in the first place at some point which will be more of a problem than transferring out of an estate currently.  An LLC is real and can hold a license......a trust can't, that should be the first warning sign.  LLC's can also be sold as easy as pie. 

The one sole advantage for a time was the CLEO signature exemption which actually was a hard push on aft to do away with it which really did benefit everyone.

[Doug Quaid]

I'm kind of a bookworm, I love general knowledge and spend a lot of time reading.   Not a big deal, it's a fairly common personality trait.

When the NFA trust thing kicked off, I read every word that I could find about trusts, and to this very day I still have zero clue what the heck a trust is or how it works.

It appears to be some sort of legal vehicle for group ownership of something, but what it exactly does and how it is utilized in the law is a mystery to me.

I even made a trust on Quicken Will Maker and looked it over really carefully.  But the problem is that I had no criteria to use to tell if it was a good trust or a bad one.   It could be the best trust in history or a complete pile of cr-p.

That was what made me not want to use it - I couldn't evaluate if it was good or not.   And just because the ATF accepts it doesn't mean that it's good.  ATF are not trust-ologists.

Long story short, I bagged the whole thing and went with individual transfer.  

Not trying to carp on the subject, just maybe save you the $90 for Quicken Willmaker.  I got no value out of that purchase that I can see.   A lawyer it ain't.



 

Edited March 27, 2024 by Doug Quaid

[johnsonlmg41]

The main use of a trust is to shield high value titled assets/estates from certain tax payments upon death.   If you have an estate well over 25 mil.  or stuff that heirs can't immediately pay the taxes on or need to liquidate quickly to pay the taxes, then maybe a trust is for you?   If you have four machine guns you want to "share" with friends while you are not present via a trust, it's likely a bad idea in the first place.  Of the firearms I've "loaned out" while not present over the years, they have all been sub-$500 guns.....for good reason.  If you have a trust and are checking out NFA items like books at a library it's probably not a good plan? 

Once again, the sole reason was to avoid the unconstitutional CLEO signature requirement, and that ship has sailed.  If you find a lawyer that specializes or recommends gun trusts, that's a lawyer you should stay far away from IMO.