National Firearms Act Trusts – NFA Trusts

So, you have never heard of an NFA Trust? A little history lesson may help you understand why NFA trusts exist and who creates NFA Trusts to hold Title II firearms.

It all started with cops and robbers; or more specifically, the FBI and the notorious gangsters of the 1930’s. Shortly after the repeal of prohibition, Congress passed the National Firearms Act (the “NFA”). Realizing that the second amendment prohibited an outright ban on firearms, Congress imposed restrictive regulations by way of an expensive tax and registration requirement. Under the original NFA, machine guns, short barreled rifles and shotguns (SBR’s & SBS’s), any other concealable weapon other than a pistol or revolver (AOW’s) and silencers (suppressors) were regulated, required registration and the payment of a $200.00 stamp tax. Remember that this is the 1930’s, and $200.00 was a lot of money. That is about $2,800.00, today, adjusted for inflation.

While the NFA has been amended over the years, the $200.00 stamp tax has remained constant for machine guns, SBRs, SBS’s, suppressors, and destructive devices (DD’s). The tax on AOW’s was reduced to $5.00. However, all categories require registration by the owner and approval by the Bureau of Alcohol, Tobacco and Firearms (the BATF or ATF).

The penalties for illegally possessing a weapon regulated by the NFA are very severe. Each violation carries with it a 10 year prison sentence and a $250,000.00 fine. Next time you want to try out your buddy’s short barreled rifle, suppressor or cane gun, keep that in mind. Only the person who registered the weapon with the BATF and paid the stamp tax may legally be in actual or constructive possession of the weapon.

The key word in the above paragraph is “person”. The term person includes individuals and other entities like corporations, LLC’s and trusts. In order to allow friends and family to legally possess NFA weapons and avoid arguments about constructive possession, individuals have turned to trusts with multiple trustees to comply with the law.

An NFA trust is truly a different species of trust. Properly drafted, it allows for multiple settlors of the trust, multiple trustees who can possess the weapon thereby letting several individuals be in legal possession of the weapon, lays out strict rules for who can be a trustee, identifies very specific beneficiaries and in general makes anyone reading the trust document aware that they better be careful.

Note: The above text was updated on November 22, 2010.