Do I Still Need a Gun Trust After ATF 41F?

The new ATF 41F regulations became effective on July 13, 2016. This rule affects the documentation that needs to be submitted with each new Form 1 (request to make an NFA firearm), Form 4 (request for tax-paid transfer of an NFA firearm), and Form 5 (request for tax-exempt transfer of an NFA firearm) filed on or after July 13, 2016. ATF 41F does not change the advantages of using a gun trust to acquire NFA firearms.

Gun trusts provide important advantages to owners of NFA firearms, as well as non-NFA firearms.

• All Co-Trustees Can Use and Possess the NFA Firearms Registered to the Gun Trust

When you purchase an NFA firearm, the purchaser is listed as the “transferee” on the ATF tax stamp. An ATF tax stamp is similar to a title certificate to a car—it is the official U.S. government-issued document that identifies one specific make, model, and serial number of NFA firearm that is owned by the transferee. If you buy the NFA firearm as an individual, your name will be listed as the transferee on the ATF tax stamp. This means that you can never allow any other person to be allowed to use or possess the NFA firearm outside of your direct physical presence. If anyone, such as your wife, adult children, or brother, has unsupervised access to the NFA firearm during your lifetime, then he or she is committing a felony.

However, if you buy the NFA firearm using a gun trust, then the gun trust will be listed as the transferee on the ATF tax stamp. Any individual whom you, as the Settlor and the Initial Trustee of the gun trust, appoint as an Additional Co-Trustee of the gun trust may legally use and possess the NFA firearm independently and outside your physical presence. In our document package, we provide an Appointment of Additional Co-Trustee document that provides you with the ability to appoint an Additional Co-Trustees anytime you wish. As soon as you and the Additional Co-Trustee sign the document in front of a notary public, the new Additional Co-Trustee may legally borrow the NFA firearms owned by the gun trust. Moreover, our document provides you with the ability to appoint Additional Co-Trustees on either a long-term or short-term basis, such as while on a hunting trip. In addition, we provide a Removal of Additional Co-Trustee document that provides you with the ability to remove unilaterally any Additional Co-Trustee at any time and for any reason. Together, our documents provide you with the ability to control who has legal access to the NFA firearms owned by the gun trust throughout your lifetime.

• Firearms are Inherited by the Beneficiaries of the Gun Trust Outside of the Probate Court Process

Another significant advantage of a gun trust is that it takes all NFA firearms acquired by and all non-NFA firearms assigned to the gun trust out of the Settlor’s probate estate. As as result, a detailed inventory of your gun collection would not be included in the inventory of assets filed by the executor of your will in the probate courts records, which is a public document. In addition, a probate court would not be able to order your gun collection to be sold to pay creditors of your estate when you die. Also, your gun trust converts into a “spendthrift trust” for your beneficiaries, which means that your beneficiary’s creditors would not be able to seize the gun collection to pay the beneficiary’s debts. Overall, gun trusts are a quicker and more private method of passing your firearms to your beneficiaries when you die.

• Gun Trusts Protect Your Firearms Upon a Determination of Incompetency

Individuals who have been adjudicated to be mentally defective are not allowed to receive and possess firearms or ammunition under Federal law. As a result, if any court, board commission, or other lawful authority made a determination that you were a danger to yourself or others or that you were incompetent to manage your own affairs, your Second Amendment right to use and possess your firearms collection would disappear immediately. Over the last few years, the Obama Administration has interpreted this provision to expand the power of the Federal government to strip law-abiding citizens of their Second Amendment rights.

For example, when a veteran applies for disability benefits with the Veteran’s Administration (“VA”), if a doctor completes a VA form, citing dementia or any other illness that may affect the mind as a diagnosis and/or indicates on the form that the veteran does not have the ability to manage his or her own financial affairs, the VA is required to forward the veteran’s name to the Federal Bureau of Investigations (“FBI”). The FBI enters the veteran’s name into the Instant Criminal Background Check System (“NICS”). In addition, if the veteran designates someone else, such as his or her spouse, as a representative payee, even if only for the veteran’s convenience, the designation of a representative payee to deemed to be an admission by the veteran of incompetency. As a result, the veteran is no longer permitted to possess and receive firearms or ammunition under Federal law.  In addition, the Obama Administration is in the process of attempting to impose new regulations on the Social Security Administration, so that it will be required to use similar procedures to strip Social Security recipients receiving Disability Insurance or Supplemental Security Income (SSI) of their Second Amendment rights. The Obama Administration estimates that it will be able to strip approximately 75,000 law-abiding U.S. citizens annually of their Second Amendment rights.

If your firearms are owned by you individually and you are later deemed to be incompetent, your firearms collection is subject to confiscation immediately. While you may be able to have someone else operating under a power of attorney to take possession of your non-NFA firearms (if you actually had a power of attorney in place before you were found to be incompetent), it is illegal for an individual acting on your behalf under a power attorney to take possession of your NFA firearms. So you can kiss your NFA firearms goodbye. On the other hand, if your gun trust owns your firearms, any Additional Co-Trustee can take possession of your firearms to hold them on your behalf. In other words, you will not lose ownership of your firearms. As as result, you will retain the ability to either direct that the firearms be sold and the cash returned to you, or that the firearms continue to be held in trust for the beneficiaries to inherit when you die.

• NFA Firearms Acquired by Your Gun Trust May Prevent You from Paying the Transfer Tax Twice

In most cases, whenever an NFA firearm changes owners, the ATF charges a $200 transfer tax. The transfer tax is paid you the buyer. If you buy your first NFA firearm as an individual from a Class 3 dealer, the dealer files an ATF Form 4 application requesting permission to transfer the NFA firearm from the dealer to you, and you pay the $200 transfer tax. If you later decide to transfer your NFA firearm into a gun trust, you will be required to file an ATF Form 4 application to transfer the NFA firearm from you to your gun trust, and you will pay the $200 transfer tax again. Quite often, an individual acquires three to five NFA firearms individually, before coming to the conclusion that he or she should have bought them using a gun trust. To correct their mistake, the individual then ends up paying the $600 to $1000 in transfer taxes, which he or she would have saved if he or she had bought their NFA firearms with a gun trust initially.

Conclusion

Under ATF 41F, instead of simply providing a copy of your gun trust along with the ATF application, you will also provide a passport-type photo and two sets of fingerprints along with your application. There is also a new requirement that all “Responsible Persons” on your gun trust must mail a copy some or all of the application to the Chief Local Law Enforcement Officer. In our gun trusts, the Settlor (you) and the Initial Trustee (you) are considered a “Responsible Person” under the ATF’s definition of the term. In addition, any person whom you later appoint as an Additional Co-Trustee using the our Appointment of Additional Co-Trustee form (and who is still serving as an Additional Co-Trustee) is considered a “Responsible Person.” Beneficiaries and Successor Trustees identified in the gun trust are not considered to be “Responsible Persons,” unless you have later appointed them as Additional Co-Trustees using the Appointment of Additional Co-Trustee form. In other words, if an individual, other than you, has not signed an Appointment of Additional Co-Trustee form, he or she is not a “Responsible Person.” Generally, this is ATF 41F in a nutshell, which merely increases the cost in terms of time and money required to obtain fingerprints and photographs. ATF 41F does not eliminate gun trusts, nor does it change gun trusts, nor does it change the reasons why you should use a gun trust to acquire NFA firearms.

Would you like to have the peace of mind that comes with knowing that you received a high-quality, state-specific NFA gun trust drafted by a very experienced gun trust attorney who is recommended by some of the largest and most successful Class 3 dealers in the United States? Let’s get started!