Occasionally, one of my NFA gun trust clients asks whether he and one or more of his friends or relatives can set up an NFA gun trust in which they can each contribute NFA firearms into the same gun trust. Unless the client is referring to a spouse, I generally recommend against it because it confuses the concept of ownership with the concept of possession.
As an initial matter, when a person buys any kind of firearm, whether it be a Title I or Title II firearm, the person considers himself to be the owner of the firearm. When a client sets up a Colorado NFA gun trust, he assigns this NFA firearm, as settlor, to the gun trust. He also names himself, at a minimum, himself as the trustee so that he may possess, use, and enjoy his own NFA firearm. If the client is married, the NFA firearm is marital property in Colorado, so the spouse, as part owner of the NFA firearm, is also included as a settlor and as a trustee. The settlors (the owners) have the power to add and remove trustees (those who may possess now) and beneficiaries (those who may posses when the settlors die). If the client wants his friends or relatives to be able to borrow his NFA firearm, the friends or relatives can be included as trustees of the gun trust. In a similar vein, if the client has a falling out with one or more of the trustees, he can quickly and easily remove them.
On the other hand, if the client establishes an NFA gun trust with one or more of his friends or relatives, each is listed as a settlor and a trustee. Each of the NFA firearms in the gun trust are titled in the name of the gun trust. Also, each of the trustees is still able to possess any of the NFA firearms in the gun trust. Any of the settlors may revoke the trust at any time and for any reason. Now, if the client has a falling out with one or more of the settlors/trustees, the client may need to transfer one or more NFA firearms out of the trust at a cost of $200 each. This option, while perhaps, inexpensive on the front end, simply does not take a long-term view and may prove to be very expensive later.
NFA gun trusts are meant to be very long-term documents, much like a will, and thus, require careful consideration and selection of settlors, trustees, successor trustees, and beneficiaries. When one or more friends or relatives want to be able to possess, use, and enjoy each other’s NFA firearms through a NFA gun trust, I recommend that they each establish their own NFA gun trust, so that the line between ownership and possession is clearly delineated.
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