Does your collection include some of the most beautiful European guns ever made, such as the Italian Fabbri Over-Under, the Austrian Peter Hofer shotgun with sidelock or the English J. Purdey & Sons Damas steel work of art?
Perhaps you enjoy the rich and storied history behind American guns like the Colt New Army Model 1860 that was one of the most recognized handguns of the Civil War. The Colt Single Action Army Peacemaker of Western frontierlore. Or even the Derringer pocket pistol that kept many a poker game under control.
The number of gun categories that are collected is vast, but they all have a few things in common: passion, history—and risk. As insurance and risk management professionals, we focus on just what that risk entails:
- Property: The pure property risk is loss or damage to your firearms. Are they properly insured? Are they correctly stored, cleaned, maintained, repaired and transported?
- Liability: What happens should an injury result from the use, care or maintenance of the firearm?
- Estate Planning: Traditional estate planning may instruct people to violate laws related to the transfer, possession and use of firearms.
Because the property risk is fairly straightforward, we’ll focus on liability and how estate planning can actually create a gap in coverage.
A recent trend in estate planning for gun owners is the creation of a gun trust. A gun trust is an estate-planning vehicle created to own, use, protect and pass down firearms to heirs.
Gun trusts offer owners peace of mind that they’ll be able to own certain firearms and pass them down to family members.
A trust assists with compliance with strict federal and state laws and help owners avoid inadvertent felony violations, particularly when the estate executor isn’t familiar with restricted gun ownership rules. State and federal laws define what individuals, business entities and trusts can purchase, possess, use and transfer firearms.
In addition to the legal requirements, there are moral and ethical issues that gun owners should consider before giving someone a firearm. A gun trust allows you to instruct others on how to evaluate such relevant factors as the firearms’ geographic location, the location of the beneficiary and his or her legal status, maturity and level of responsibility. The point, of course, is to prevent the giving of guns to someone who may not be appropriate.
Gun trusts also offer owners peace of mind that they will be able to own certain firearms and pass them down to family members even if gun laws change in the future. Further, gun trusts offer asset protection for both the grantor and beneficiaries, while taxing only the trust grantor. These are complex issues that require a skilled and experienced attorney. Federal laws regulating gun trusts are changing this upcoming July (July 13, 2016), making the registration process more onerous. Existing trusts will be grandfathered into the existing rules.
So, how does all of that planning create a potential gap in insurance? Most homeowners insurance policies don’t automatically include trusts. Imagine a family member injuring another person with a firearm owned in a trust; as the policy holder, are you prepared to pay defense and damages (on behalf of the trust) out of pocket?
Using an insurance broker who views your risk holistically will ensure that planning and protection work together with your wealth-preservation strategy.
Insurance services provided through NFP Property & Casualty Services, Inc., doing business in California as NFP Property & Casualty Insurance Services, Inc., License # 0F15715.
This article was originally published in the June/July 2016 issue of Worth.