I am not a lawyer, and if you have any legal questions concerning owning NFA weapons or creating an NFA trust, you should contact an attorney or the BATFE. The following is my experience having gone through the process numerous times.
Here in MN, we are limited by what NFA weapons we can own by state as well as federal law. We can only have machine guns manufactured prior to 1986 *and* are on the curio relic list. Silencers and short barrel shotguns are illegal by state law, as are some destructive devices. SBRs are perfectly fine. Class 2 manufacturers and class 3 dealers are exempt from these laws, but have additional federal regulations they need to comply with. For the sake of simplicity, the below assumes the person registering an NFA weapon is not a class 2/3, law enforcement, or military procurement office.
First off, there are 3 types of entities that can own NFA weapons - individuals, corporations, and trusts. There are 2 BATFE forms that are used to register an NFA weapon. The original manufacturer of an NFA weapon registers it on a BATFE form 1, and ownership transfers are registered on a form 4. If you are manufacturing an SBR you will do so on a form 1.
If an individual registers an NFA weapon, he has to provide FBI fingerprint cards and a passport photo to BATFE, and get the chief law enforcement officer (CLEO) where he lives to sign the form 1 application stating he has no reason to believe that the weapon will be used in a crime. This is a pain in the butt, takes a lot more time for BATFE to process, and many CLEOs won't sign off on the form 1 as doing so is entirely optional. Corporations and trusts don't have to provide fingerprints, photos, or get the CLEO signature, so is much less hassle and speeds up the background check and registration process. Any officer of a corporation, or trustee in the trust may also be in possession of the NFA weapon, where only the registered individual can be in possession if registered as an individual. Even if a person already owns a corporation, it may be preferable to create a trust that will own the NFA weapons instead of using the corporation. The reason is that corporations can go out of business, be sold, be sued, have their assets seized, etc. Also, if you don't already have a corporation, creating one for your NFA weapons isn't a very good idea, as corporations require annual paperwork, tax papers, etc. Trusts have the same benefits that corporations do when they own NFA weapons, but none of the recurring hassles.
A trust is similar to a will in that you assign property to it and specify beneficiaries for that property when certain conditions are met (like when you die). People like trusts over wills as they don't have to go through probate when the grantor of the trust dies, or because you can setup rules where the trust will payout certain amounts every month or whatever (think trust fund kids). However, since the property in the trust is owned by the trust (rather than the grantor - the individual who created the trust), a revocable living trust is considered to be the best legal entity to own NFA weapons.
There are a lot of conversations online that you need a lawyer to setup a trust for owning NFA weapons. It seems that most of this originates from lawfirms that specialize in this. My experience and research shows this is pretty much BS. You can use estate planning software to create a trust that is perfectly capable of owning an NFA weapon. The problems seems to be the individuals that are named in the trust, rather than the trust itself. As a general rule when assigning people to the trust:
1) Anyone named in the trust - trustees, beneficiaries, conservator, etc. all have to be legally able to own NFA weapons. No kids, criminals, etc. If you make your brother a successor trustee, and he is convicted of a felony, you need to modify and remove him from your trust. Note that once the BATFE issues you your stamp, you are not required to notify them in changes to the trust unless you revoke it for some reason.
2) You (the grantor and trustee of the trust) cannot also be a beneficiary. As a general rule of thumb, don't have anyone in the trust serve more than one role. In other words, don't make beneficiaries that are also trustees, etc. Keep the trust small and simple.
3) You need to have at least 3 people named in the trust - yourself as grantor and trustee, at least one beneficiary, and a conservator that can take over the administration of the trust if the grantor becomes incapacitated. Even though a conservator doesn't make much sense for an NFA trust, you still need one for the trust to be legal.
4) The trust needs to own property. If you are converting a title 1 weapon into a title 2 weapon (manufacturing an NFA weapon), simply assign the original weapon you will be modifying to the trust when you create it.
If the trust isn't set up right, or if something happens that makes it unable to own NFA weapons, then you'd be in possession of an unregistered NFA weapon.
Here is an easy way to setup a trust:
Get a copy of Nolo Living Trust Maker - http://www.nolo.com/products/living-trust-maker.html
This is a new product in 2013. The trust module used to be included in Quicken Willmaker, but has been moved into it's own product in 2013. Although the product is different, most of it is likely going to be the same, and here's a good writeup on using it - http://arizonagunlist.com/How_to_buy_NF ... gnoff.html
When you get to the point where it asks to place items into the trust, put the weapon that you intend to convert into an SBR into the trust. You do it under the option where there is no titles or other paperwork for the item. Make sure to include the serial number in the description.
I recommend changing the name of the trust that the software sets up for you, and only put your NFA weapons in that trust - just in case you want to setup another trust in the future for other things. At the point where it gives you the option to print the trust documents, export them to RFT format instead of printing them. You can then open them up in word and change the name of the trust. You have to change it everywhere it appears exactly the same way in all of the documents, and then go back and make sure the page breaks all line up correctly (incorrect page breaks might result in an invalid trust). The name of the trust is what is engraved on the receiver, and most people don't want their complete first and last names engraved on the weapon. Most people name their trust something like the following:
J.M. Doe NFA Trust
Finally, take all the trust documents to a notary and have them notarized. Make a bunch of copies. If your paranoid, shoot them past a lawyer to make sure it's all setup right.
Now, fill out the form 1. You can do it online and then print it when your done - http://www.atf.gov/forms/download/atf-f-5320-1.pdf
section 1 - check box A
section 2 - check 'corporation or other business entity'
section 3a - leave blank
section 3b - The name of your trust, and your full address as it would appear on a mailing label
section 3c - Leave blank unless line 3b lists a PO box, in which case put the real address here
section 3d - county of the address in 3a
section 3e - your phone #
section 4a - what is currently engraved on the firearm, ex - Sig Sauer Exeter, NH
section 4b - 'Short Barrel Rifle'
section 4c - caliber of the weapon, ex - 5.56x45 mm
section 4e - the length of the barrel
section 4f - the overall length of the weapon. If the stock folds, this measurement is unfolded. If the stock collapses, this is the most collapsed position.
section 4g - the existing serial number of the weapon
section 4h - this is what you will have engraved on the weapon after the form 1 is approved. It is the name of the trust, and the city and state where it will be made into an NFA weapon. If you want to abbreviate the city name, ex - Minneapolis MPLS, this is where you do it. Just make sure that whatever is specified in 4h is exactly what is engraved on the weapon.
section 4i - 'All lawful purposes, collector'
sections 5 and 6 - FFL and SOT info. Leave blank if not an FFL or SOT
sections 7 and 8 - a bunch of questions. If any are yes you will be denied.
section 9 - leave blank
section 10 - 'Grantor and trustee'
section 11-13 - leave blank
Double check everything, and print it. Make sure you print it on both sides of a single piece of paper. If you print on 2 pieces of paper they will reject it. Sign section 9 and date section 11. Make a couple of copies.
Now fill out the form 5330.20. You can do it online and then print it when your done - http://www.atf.gov/forms/download/atf-f-5330-20.pdf
section 1 - the name of the trust
section 2 - your full name
section 3 - any other country you have dual citizenship with, or leave as-is
section 4, 5 & 6 - only fill out if you are not a US citizen
Double check everything, and print it. Make sure you print it on both sides of a single piece of paper. If you print on 2 pieces of paper they will reject it. Sign and date section 7. Make a couple of copies.
Get a money order or cashiers check for $200, made out to 'The Bureau of Alcohol, Tobacco, Firearms and Explosives'.
Package up a copy of your declaration of trust (not the original, and not the certification but the full declaration of trust), your Form 1 and Form 5330, and the $200 cashiers check and send them all off to:
National Firearms Act Branch
The Bureau of Alcohol, Tobacco, Firearms and Explosives
244 Needy Road, Suite 1250
Martinsburg WV, 25405
It should take about 3-5 months for the form 1 to come back approved. During this time you can send your receiver out for engraving. You must engrave the name of the trust, and the city and state where the weapon will be converted to an NFA weapon. It should exactly match what you entered into line 4h of your form 1. There are engraving size, depth, and location requirements that need to be adhered to. I recommend you send it off to someone who is familiar with the requirements, and does this for a living to make sure it's done correctly, and looks good. Don't get it done at a hardware store or trophy shop. A good place is Orion Arms - http://www.orion-arms.com/
Then it's pretty much just waiting for the paperwork to come back. Don't build the SBR until you get the approval from BATFE, and don't buy the parts to convert it into an SBR until you get approval from BATFE. Technically, if you have the parts to make an SBR, but don't have an approved form 1 in hand, you can be convicted of 'constructive possession' of an SBR.
After the approved form 1 comes back, make a ton of copies. Put one in the gun case, one in the stock, one in your car, a 1/4 size one in your wallet, etc. You don't ever want to find yourself in a situation where you can't produce the form 1 if you need to. I also keep a copy of the certification of trust in my gun case just in case I need to prove my relationship to my trust. If you name anyone else as a trustee in your trust, any time it's in their possession they need to have both a copy of the form 1, and the trust document proving they are a trustee of the trust. After the form 1 comes back and you've built the SBR, update the property in the trust and change the description of the original weapon to be a 'Short Barrel Rifle'.
The trust thing is the hardest part, but fortunately those individuals who BATFE has gone after for having invalid trusts (people who listed themselves as a beneficiaries, or who put their underage kids as trustees, etc), simply correcting the trust paperwork has been a satisfactory resolution to the problem. To date no one has gone to jail over a problem with a trust.
If you want to spend some $$$ and cross every t and dot every i, these guys have a lot of good info - http://www.guntrustlawyer.com/ If you want to list underage children as beneficiaries you can, but you'll need a lawyer like these guys to draft your trust with the appropriate legal wording on what happens to the NFA weapons after you die, but before your children become of legal age to own them. The Nolo trust products won't go into that level of detail.
Anyways, thats pretty much it. Alot of hassle mostly. I recommend calling the BAFT NFA branch and double checking everything before mailing out your stuff as they do change things from time to time - they used to not require form 5330 for trusts, and they used to accept certification of trusts instead of the full declaration of trust. they may have different requirements since the last NFA weapon I registered.
Once again, I am not a lawyer, and the above is not legal advice. It is a detailed description of my experience in registering an NFA weapon - YMMV.
BATFE NFA Branch - (304) 616-4500