Creating a NFA trust in Oregon
Many thanks to PhilipPeake for putting the time into this, also Skidog too.
First, some potentially useful links on Oregon trust law:
Article from Oregon State Bar Association:
Living Revocable Trusts
ORS 130 - Oregon trust law:
ORS 130
and another on using trusts for NFA purposes:
Phoenix gun list
There are various ways that you can create the trust. Probably the easiest and safest is to get a lawyer to do it for you. However, this not only costs money, but finding a lawyer experienced in estate planning and NFA might be something of a challenge.
If there are such lawyers out there, letting people know of your experiences with them would probably be appreciated by many.
If you don't use a lawyer another option is simply to write up the trust yourself. Doing this is almost certainly a high-risk undertaking and not something I would recommend (unless you are a lawyer, of course).
The option most people choose is to use a piece of software created specifically for the purpose of generating legal documents, and more specifically estate planning documents. There are more than one of these software packages. I have looked at two.
The first is called WILLPower and came free with my tax software. Its a joint creation between H&R Block and Kiplinger. The second is WillMaker from Quicken/Nolo.
The big difference between the two (apart from the much better interface on WillMaker) is that WillMaker constrains what you can do to ensure that the generated documents are both legal and internally consistent. WILLPower allows more flexibility in that you can include some of your own wording (and thus screw up your trust, and yourself, if you are not careful what you are doing).
Given the fairly simple trust that we are considering here WillMaker is probably the better choice
if you want to do it yourself. Most people that have created NFA trusts seem to have used WillMaker to generate the trust documents.
In Oregon creating a trust is very easy and cheap. You simply produce the trust document and have the trustee(s) sign it in the presence of a notary public. That’s all there is to it. Once the trust exists legally, you can transfer possessions in and out of it as you wish. There are two types of items that can be placed in the trust, non-documented items (such as cash, your AR15 etc.) and documented items (such as your car, your house or NFA items). To transfer documented items you have to change the legal owner on the documentation to be the trust. So for existing NFA items you would have to do a transfer on a Form 4 and pay the $200 tax.
WillMaker lists items covered by the trust on a separate sheet (or sheets) of paper, entitled "Schedule A". When you transfer something into the trust, you add it to the list in Schedule A, print out the new Schedule A, destroy the old one, and put the new with the rest of the trust documents.
Let’s be clear on the above. For NFA items that you already have, you CAN NOT just list them on Schedule A and transfer them that way, you have to do a transfer on Form 4 from yourself, to the trust, even though you may be the trustee. When you acquire new NFA items you simply use the name of the trust as the refipient (Form 4) or manufacturer (Form 1).
The following is a quick run through the creation of a basic trust using WillMaker.
Terms such as "trustee", "beneficiary" etc. are not described here as the software describes these in detail as you proceed.
The way that WillMaker builds a trust is not the only way to do it, but it’s the only way that WillMaker allows.
One item that causes some head scratching when you encounter it is the need for three people who will decide if you are truly incapacitated for any reason, and hand over control of the trust to a successor trustee (if you have one).
You may want to think about who you will use here before starting work.
Once you have fired up WillMaker, proceed as follows to create the simplest form of trust:
Create new document –– Living Trust - Basic Trust
Select Oregon as state, and marital status.
Select Individual living trust
Enter your name and sex
Enter successor trustee(s) - can be anyone you trust to follow the trust rules on your death.
Alternate successor - if you want one.
The hard part:
Name three people who you trust to determine if you are truly incapacitated and give trusteeship to your successor trustee.
List trust property - at this point put holding text –– "NFA Items" –– you will replace this as you add items to the trust later.
NFA items have title documents –– the form 1/4, click on your entry and then the title document button.
Beneficiaries - distribution of property. Select as you see fit.
Alternate beneficiary - as you see fit
Beneficiaries under 35 - you *can* do this for under 35, but Oregon only requires it for under 21.
This link is to a document produced using WillMaker.
In this case, it’s a basic revocable trust. The following people are named in the trust:
John Q Person –– The Trustee
Jane Q Person –– John's wife, Successor Trustee, and maybe Beneficiary
Junior Q Person –– John's son, Successor Trustee in the case that Jane can't do it, and primary Beneficiary
Fred Q Person
Bill Q Person
Mary Q Person
–––––– These three people form a committee in the case of incapacity of John to nominate Jane as Trustee
As well as the trust document, WillMaker also spits out warnings about not modifying it in any way, other than through WillMaker, or you may end up with an invalid trust, or the meaning may not be what you intended.
After reading the trust document, my conclusions were that it was really oriented towards managing financial assets and that many of the clauses were superfluous to my requirements, however, they seemd harmless, so I left them alone.
The big problem was that it wasn’t clear that it achieved my objectives, which was not only to have the NFA items in a trust, but to give certain people rights to access and use them.
WillMaker was no help here, so I went to
the monster thread in the Class 3 area to see if anyone had tackled this. Someone had, he had achieved his aims simply by adding a clause listing the names of people having the right to access and possession. Not all of these people were trustee or beneficiary, it was just a list.
So it seemed that you needed to modify WillMaker output anyway. I looked at it again, and decided it probably needed a couple of changes.
First, it didn’t really seem to give the trustee any powers other than financial ones. So I added an extra clause to cover this 7(B)14:
| 14. The power to access, to possess and use any and all trust property at any time. |
Next, I looked at the section on beneficiaries, and modified it by making the existing text part A entitled “Disposition of Trust Property” and adding a part B:
B. Access to Trust Property
Beneficiaries of this trust are hereby granted full privileges and access to possess and use any and all trust property at any time. |
That seemed to fix it (to me).
The next step was to pay a lawyer to look this over and get a professional opinion.
Fortunately, there is a lawyer with experience of trusts who is a member of this board (ski_dog), so I sent him my work for his opinion.
The trust I sent for review was for me. It was pretty much identical to the one for John Q. Person linked to previously, but with names of my family members and the additions I mentioned previously.
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Got the review back from ski_dog.
Seems that his first impression is a lot like mine. In the cover letter along with his review he includes the following comment:
| I would mention to those that are wanting to go the trust/NFA route that it is a very good idea to consult with an attorney first. Although WillMaker may get you there, there are a lot of details that no doubt go overlooked. There also are a lot of clauses that I would have drafted differently or left out altogether. For NFA purposes, you really just need a really basic trust, without much of the estate planning language that Willmaker includes. |
For once, I actually find myself pretty much agreeing with a lawyer.
Some of his other comments that I found illuminating are listed below. Its obvious that he thinks in a different way to whoever formulated WillMaker. That’s not surprising to me. Ask three lawyers for an opinion, and you will end up with four different ones.
Please note that the following isn’t the whole of the review, just stuff that I think is worth calling out.
| If you want all of your firearms to be distributed in the same manner that you set up in your trust, you should sign an assignment stating that and have it notarized. Then keep that assignment with your trust paperwork. Then there are no questions at any time in the future how your distribution of firearms is to take place. You could also state in your trust document that you will distribute them by memorandum, and then fill out (by hand) the memorandum of distribution. |
I like this, because it covers everything cleanly, and allows the distribution memorandum to be updated without having to update the trust – along the same lines as keeping the property on an attached schedule rather than listed in the trust proper.
| Part 2: I would include language to the effect: “The grantor may add or remove property to or from the trust.” This would only come into play if you ever sold or transferred an item owned by the trust. |
I missed this myself. Definitely worth stating clearly.
| Part 6(A) You should name multiple trustees: all of the people that you want to be able to possess and use the NFA items should be listed as trustees. I would name yourself, your wife, and your son. |
This gets expanded upon later. It is, however, something that seems quite difficult to do with WillMaker. If you are creating a trust just for yourself, only you having access etc. WillMaker is probably fine, but once you get more people involved, its formulas start to get in the way. For example, I thought I could use the joint husband/wife version, but it starts insisting on listing the property of each – no way around it. Its really not suitable for our purposes here.
| Part 6(D) and Part 8: I would add language which makes clear how and when the successor trustees take over that role. Don’t leave it to a committee as it is in Part 8. I usually advise clients to say something like this: “In the event of the death or disability of John Q. Person, Junior and Jane Person shall serve as co-trustees. John Q. Person shall be deemed disabled under this article based upon the written opinions of two (2) licensed physicians.” This better defines the point in time at which you will no longer be a trustee of the trust. You don’t want to leave it too open-ended, and you don’t want to appoint a committee for your mental capacity. These people don’t ever want to admit that family members are incapacitated. I always use the advice of 2 doctors for this reason: much more detached from the situation. |
Personally, I like this much better. Thinking of three people that I would trust to make those decisions is much harder than it seems.
The topic of dealing with unforeseen, but foreseeable circumstances continues:
| Add this to Part 6(F): “In the event that there is no individual named in this document who is willing and/or able to serve as Trustee, the living beneficiaries of this trust shall vote upon and elect a Trustee.” |
Now we get to my additions, and what a real lawyer thinks of them:
| Part 7(14) is inherent in acting as a Trustee. The role of a Trustee is to manage the trust assets for the benefit of the beneficiaries. Viewed in this light, the Trustee is really required to access and possess trust property at all times. The Trustee has a fiduciary responsibility to manage these assets for the beneficiary. That being the case, you really don’t need to include this section, but it won’t really cause a problem that I foresee. |
So what he seems to be saying, in as nice a way as possible, is that I was worrying about nothing, as far as the trustee goes. Some things are implicit in the terms used in legal documents. It is just understood that the term “trustee” has various known powers and responsibilities which don’t necessarily need to be enumerated.
The book that is available to accompany WillMaker suggests very strongly that you avoid technical legal terms. I think this is mainly because such terms have very specific and sometimes quite complex meanings which a non-lawyer may not completely understand. However, replacing that term with plain English can sometimes lead to quite lengthy descriptions. When words and lawyers mix, the more words, the more the possible interpretations multiply, often in ways that you may not like.
One of the legal phrases on the WillMaker no-no list is
per stirpes. However, our friend ski_dog has this to say:
| Part 10(A)(1): If you want the item to go to your son’s children if something happens to your son prior to your death, I would make that explicit. If you simply leave it to your son and add “per stirpes” then the trust assets would be evenly divided between the number of living children he has at that time (or grandchildren). You could even put some friends who are into guns on the list, just in case something happens to the people who are listed already. |
Note how one legal term replaces a reasonably lengthy English description, and that term has a very tightly defined and understood meaning. Sometimes, lawyers earn their money.
The biggest change that I made was in adding a complete new section to the Beneficiaries section to make certain that they could access the toys. This brings the biggest comment so far:
| Part 10(B) I would not include. The trustee is to manage trust assets for the benefit of the beneficiaries. In my assessment, only the trustees can be in possession of the NFA item. If the beneficiary is not a trustee, then the trustee must accompany them when they are using it, or they will be in violation of the NFA. On the paperwork from ATF, the trust will be listed as the owner of the NFA item, so it makes sense that only a trustee could be in possession of it. Think of it this way: a Trustee can write checks on a bank account owned by the trust. A beneficiary cannot, because they are not acting in the role of trustee. They can receive a benefit from the bank account, provided by the Trustee, but they themselves cannot access that account without the Trustee. That is why I would list people as Trustees that I wanted to be able to use the item by themselves, without you having to be there as with an individually owned NFA item. |
Now this doesn’t exactly match the advice that was given to the person posing in the monster thread mentioned above, which essentially added a new class of person to the trust, those permitted to use trust property, but as we have already observed, legal advice varies depending upon who you ask.
I tend to feel better about this advice, because it seems pretty logical and avoids adding any new classes of person which are not well understood and defined in legal terms.
Addendum
Using your trust in practice.
Once your trust is signed and notarized you can begin using it to hold your
NFA items. What follows is a brief description of what to do.
When completing your Form 4 (transfer of an NFA registered item) or Form 1
(application to build and register a gun) remember that you will not need
a photograph, just leave the space blank, and you will not need the Law
Enforcement Certification part filled out.
Enter the name of your trust and your address as the name and address of
the applicant.
Fill out the rest of the form as you would normally.
Sign as the applicant. Even though the trust is the applicant, you are
signing on behalf of that trust, as a trustee.
Once the form is complete, mail 2 copies of it, along with:
* a check for $200 (orother appropriate amount, depending upon what you are doing)
* a copy of part of your trust (see more below)
* a Certification of Compliance form - this is certifying that you are a US citizen or resident alien and thus may legally possess firearms.
This form looks a little strange. You fill out all sections, you are
actually certifying yourself.
You put your name on this, not the name of the trust.
A trust doesn't have nationality, but you, as its agent, do.
Mail your 2 copies of the form, check and certification to the address
on the top right of the form.
What parts of the trust to send.
Basically, they want to see that the trust is legally established, and that
you have the authority to make the transaction on behalf of the trust.
Assuming that you are the person establishing the trust, it has traditionally
been sufficient to sent in a "Certification of trust" document. However,
the BATFE currently has internal policies which require significantly more
than this. A problem for them is that the rules for trusts are different
in most states, so they don't know what is a legal trust and what is not.
To be certain that you don't have delays in processing, you will need to
supply photocopies of the relevant parts of your trust document that do
the following:
* Creation of trust.
* What type of trust it is (revocable living trust).
* Who the trustees are (you need to be listed here).
* Any sections that enumerate or limit trustees powers.
* Signature page (with notary seal).
On contentious demand that they make is that if your trust has a Schedule A,
which typically lists the items in the trust, they want a copy of that too.
There is no Federal law or BATFE regulation requiring this information, but
their lawyer said they need it, and without it you will not get your form
completed.
Recognizing that it is non of their business what you have in your trust,
they will accept a Schedule A will all but NFA items blacked out. Its your
decision as to whether you want to obscure other items or not.
So what are my conclusions from all of this?
Lets start by saying that these are
my conclusions, and someone else may well reach a different set based upon the same input.
1) Its actually very fast, easy and cheap to set up a trust in Oregon. As in many other areas the state of Oregon keeps a light touch on regulation and doesn’t interfere where it’s not required.
2) Creating your own trust from scratch, unless you are a lawyer with at least some experience in this area is just asking for trouble.
3) WillMaker seems to be adequate for a very simple NFA trust. Basically one person as trustee, and only that person having access to the NFA items covered.
4) WillMaker is far from ideal for this purpose. It’s designed to generate somewhat idiot-proof trusts for financial assets. Move very far from WillMaker’s target and you soon encounter its inflexibility.
5) Attempting to take WillMaker output as a skeleton and adapt it to your own needs quickly runs into the same problems mentioned in conclusion 2.
6) Using WillMaker to create a trust document may be enlightening, even if you don’t use the result.
7) To do something as complex (although conceptually, it isn’t complex) as I am trying to do, WillMaker is inadequate. My legal knowledge and experience isn’t really up to modifying a base document to a different purpose.
8) For anything other than the most basic NFA (one person) trust, it would seem prudent to involve a professional (lawyer) at some point. The cost actually won’t be that high compared to the vast fortune you are going to spend on NFA items and their associated taxes.
9) Its not obvious if there are really enough advantages for a single person NFA owner to go with a trust. The only really good reason would be if you local Sheriff has any problems signing NFA forms. Of course, not having the Sheriff know your business, and not having the hassle of dealing with fingerprints may be enough reason too.
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