Guns N’ Trusts
Prior to July 1, 2013, funding a Colorado revocable trust with Title I firearms was easy and uncomplicated. A generic bill of sale transferring all of the Trust Maker’s (i.e., Settlor’s) personal property transferred any currently owned, Title I firearms and accessories.
Title I firearms are firearms that can be purchased at any sporting goods store. Title II firearms are firearms that require a special tax stamp from the Bureau of Alcohol, Tobacco, Firearms, and Explosives (BATFE or ATF) prior to the purchaser taking possession. Title II firearms are sold by Class 3 gun dealers. Examples of Title II firearms include suppressors (silencers), fully automatic guns, short barreled shotguns and short barreled rifles. While a standard bill of sale would ostensibly transfer Title II firearms owned by the Settlor, the issue seldom arose.
For firearm transfers to a trust on or after July 1, 2013, all natural persons authorized to possess the firearms under the trust document should undergo a background check prior to the transfer. C.R.S. 18-12-112(1)(b). Failure to undergo the background check prior to a transfer of possession is a Class 1 misdemeanor. C.R.S. 18-12-112(9). Background checks can be obtained from a licensed Colorado gun dealer using ATF Form 4473.
A related issue is the Colorado ban on large capacity magazines C.R.S. 18-12-301, et. seq. While banned, large capacity magazines owned and continually possessed by the owner prior to and after July 1, 2013 can be retained by the current owner, albeit not without risk of prosecution. A generic bill of sale would likely transfer those large capacity magazines to the trust and may result in a violation of Colorado criminal law.
Generic bills of sale typically have a clause that attempts to transfer any after acquired personal property to the trust. The issue with firearms is an automatic transfer of the firearm from the purchaser to their trust. This may result in a violation of law. While the background check on the purchaser in his individual capacity arguably applies to the transfer to the trust, the background check form (ATF Form 4473) specifically requires an affidavit setting forth that the purchase is on behalf of an entity (i.e., the trust) and not the individual.
Generic bills of sale are not recommended when transferring personal property to a trust. A bill of sale should probably contain cutback language prohibiting any transfer that would be a violation of applicable law. The language should be generic because this issue of a transfer in violation of law can come up in other contexts other than guns. However, some language specific to the background check law and the large capacity magazine ban may be helpful to the Trust Maker/Settlor and for clarity. A separate, custom bill of sale for the transfer of firearms is recommended. Any background checks should be attached to the bill of sale and become a permanent trust record.
The other issue is determining who is authorized to possess the firearms under the trust document. Trustees are probably authorized to possess the firearms by virtue of being trustee. In a revocable trust, the Settlor(s) would arguably be authorized to possess the firearms because the trust is revocable and the Settlors are most likely the lifetime beneficiaries. As for other beneficiaries or contingent beneficiaries, the answer is not clear.
Since the issue regarding who is authorized to possess a trust firearm is relatively recent, most Colorado revocable trusts and bills of sale do not specifically address the issue. Adding specific language addressing the issue is recommended. Some sort of savings language in the trust document and bill of sale is probably a good idea. Individuals should review any existing, generic bills of sale to see if after acquired firearms are transferred to their trust.
If the Settlor has more than just a few of firearms, a specialized gun trust is recommended. A gun trust is a specialized breed of trust. A gun trust is specifically designed to hold firearms and firearm accessories, only. A gun trust is not a good substitute for a revocable estate planning trust. Among other things, a properly designed gun trust will address the issue of a trustee becoming a prohibited person, who is authorized to possess firearms and avoid transfers when the transfer would be a violation of criminal law.
