41F created a storm of legal controversy. It changed the way NFA applications are processed, added new forms, and applied a new definition of “person” and added one for “Responsible Person.”
UPDATE 1 JANUARY 2019: The NFA Division of the BATFE recently clarified the definition of Responsible Person as applied to trusts. The definition treats a trust differently than when applied to another entity such as a corporation or LLC.
Our 2019 gun trusts incorporate updated language; prior gun trusts require an amendment to avoid a potential kickback or delay in processing an NFA application. A trust amendment is necessary ONLY IF you have a pending NFA application or are making a new one. (Prior approved applications are not affected.)
Some bloggers and industry types are crowing that NFA Trusts are “no longer necessary.” Chicken-little minded gun trust attorneys are saying that the sky is falling and that gun trusts are dead, or even making claims that YOUR gun trust is faulty.
Well, neither is really true. There is far more to the story. And, changes in the law always require adjustment to behavior and to legal documents. I have been an estate planner for years, have spent five (5) years or more creating gun trusts for NFA and non-NFA firearms, and the plans I have done in both arenas must be willing to change with the times.
What I do know is that informal talks with ATF, other gun trust attorneys, and my own clients confirm my belief that a purpose-built gun trust remains the best way for us to enjoy our firearms with others during life, and is the best way pass them on. Guns are unlike other things your or I own; many spouses tend to tolerate them but are pretty unaware of gun law issues. Could he or she be at risk if something happened to me? YES. Check out our other blogs and the memos we make available on Washington and Oregon law. The risks of transferring firearms incorrectly with potential criminal consquences are real.
ATF 41F Rule does a couple of things, but the main one is that it changes the definition of “person” and adds one for “responsible person.” Each “responsible person” or “RP” (you, as grantor of the trust, you as trustee of the trust, other trustees you appointed and persons with the potential ability to possess (even if ONLY with a named trustee) AND who are readily identifiable within the trust agreement) must provide fingerprints and a photgraph to NFA Branch, who will do a background check with each application to make or receive an NFA firearm. If this is NOT done, you will receive a kickback letter advising you of one or more actions you must take to get your pending NFA application approved.
Notification of the trust NFA application is sent to your local Chief Law Enforcement Officer (CLEO.) You submit the RP documentation with a copy of the trust and your transfer tax payment along with your ATF forms. NFA Branch will do the background check on each RP. Then you wait for approval.
So, is a trust a bust? No… because you want to share firearms with others. And, the transfer of an NFA firearm, or any firearm, can be a crime. The real benefit of purpose-built gun trusts has always been avoiding an “accidental felony.” This occurs when a firearm is transferred to another, so that they have possession, when they cannot usually have it.
Gun owners like to share firearms with family, friends, acquaintances at a range. Sharing an NFA firearm requires the tax stamp ATF form to be with the NFA firearm, but also that the individual in possession have legal authority as well. A trustee has legal authority to possess and a gun trust can have multiple trustees. Any trustee can be granted broad or limited powers to possess, can be appointed for a limited duration, or can be appointed to possess only certain trust firearms. Remember that a trust beneficiary can “enjoy” only, so if your trustee is going to personally use a firearm, he or she must be with a trustee or be appointed as one.
This is also an important issue in states like Washington and Oregon… and state firearms law creates additional concerns. see my next blog.
Here are some action steps if you have a gun trust PRIOR to July 13, 2016.
- Consider buying your NFA firerarms now. Use a gun trust – create one now since it’s business as usual until July 13, and you will not have to file anything with ATF unless you file a new applicaiton after that date.
- Review your trsust and other documents to identify persons (individual or entity!) in your plan who are RPs.
- Figure out what you need to do to limit the number of RPs should you file a new NFA application after July 13.
- Talk to your attorney to see if your gun trust should be amended or restated. Gun law is constantly changing, so your trust should too.
Here are some action steps to take AFTER July 13, 2016
- Limit the permanent number of trustees you appoint for your gun trust to limit the number of RPs.
- Appoint trustee-beneficiaries for limited purposes and for a limited duration.
- Remove non-essential trustees prior to filing a new applicaiton.
- Reappoint trustees later as needed.
- There is no requirement to update ATF of interim changes. However, it remains unknown whether an appointment made during a pending application will require RP documentation to be sent in prior to approval.
In sum, my informal chats with ATF confirm that the best way to “own” and “share” (lawyer words are actually “possess” and “transfer”) NFA firearms is a purpose-built gun trust for a host of reasons. But the main one is to document who has the legal right to possess a firearm. If it is an individual NFA firearm you must be with it at all times.
41F is no big deal for most of us. What I like about a gun trust is that it provides a way to allow others to lawfully possess and enjoy my firearms. I am in control. It takes a little time to get it in place, and learn the legal issues, but the reward is that my firearms are protected, I am better protected, and my family and friends are better protected.