Responsible Persons Best Practices: Appointing Co-Trustees to Your Gun Trust

Introduction

If you’ve purchased a firearms trust from me, your trust–assuming it’s either a Gold or Silver trust–comes with two different trustee appointment forms: A Co-Trustee Appointment form and a Special Trustee Beneficiary Appointment form. The first form contemplates longer-term appointments. The latter form is for short-term appointments, as short as an afternoon of target shooting. The purpose of this best practices guide is to help you use those appointment forms appropriately.

My general approach is to counsel my clients to have one initial trustee in their gun trust; that’s almost always the person who purchases the trust from me. I then suggest that they can use the co-trustee form to appoint other trustees later—if they want. Once they’ve made the appointment, I explain, they can always revoke the appointment later.

Responsible Persons

After talking to some other gun trust attorneys, I’ve decided to lay out some co-trustee best practices in more detail for my clients, especially as it relates to the appointment and removal of co-trustees as those positions relate to a category of people referred to in firearms law as Responsible Persons.

  • Responsible Persons are those persons in a trust who must fill out Form 23 (the Responsible Person Questionnaire), and be fingerprinted and photographed.
  • Responsible Persons include Settlors (aka Grantors and Trustmakers), Trustees, and Co-Trustees.
  • Successor Trustees (those who become trustees when you die or become incapacitated) and Remainder Beneficiaries (those who get the guns when you die) are not Responsible Persons.  

Trustee Appointments

With that introduction, what are the best practices when using the trustee appointment forms that came with your trust? Here’s a brief summary:

  1. Co-Trustees (named in the original trust),
  2. Co-Trustees (appointed via the Co-Trustee appointment form), and
  3. Special Trustee Beneficiaries (appointed via Special Trustee Beneficiary appointment form)

will all be treated as Responsible Persons if they hold that office at the time of a Form 1 or 4 application and will have to submit a Form 23, fingerprints, and photos along with the initial/original trustee(s) of the trust.

If any of the three categories of trustees are appointed via appointment form or by amendment to the trust between the time of an application and the day it is approved, they should consult with NFA Branch, which almost certainly means filing a Form 23 etc.

None of the three categories of trustees, if they are added after the application is approved, have to file a Form 23 unless and until a new application is filed.

After an application is approved and before the next application (if any), best practice is to make short-term, temporary trustee appointments, using the Special Trustee Beneficiary form; otherwise, newly minted, long-term co-trustees should plan on filing Form 23, fingerprints, etc. at the time of the next application. They can, of course, resign their appointment rather than go through the process, but they shouldn’t plan on being re-appointed soon afterward, certainly not in a we’re-gaming-the-system-sort-of way. Substance trumps form in this case.

In all cases when you appoint a trustee, whether long-term or temporary, whether by amendment or by appointment form, always

  • have them sign the trustee declaration form, attesting to the fact that they are not a “prohibited persons,”
  • keep a copy of the appointment and declaration in your files, and
  • make sure they carry a copy/photo of the signed appointment when they are carrying the NFA item—always.

These three bullet points also apply to appointments of beneficiaries.

Important: when in possession of an NFA item, a trustee should also have evidence (copy or original or photo on phone) of the item’s tax stamp.

One final thought, just a reminder, I hope: Beneficiaries using an NFA item should always remain in a trustee’s presence. Co-trustees are free to roam.

In a later post, I’ll provide a handy table laying out these rules.

I Can Help

If you would like to explore these or other ideas further, schedule a virtual meeting with me by clicking on the red button in the lower right-hand corner of this webpage for a free consultation.

Be careful out there.

Webinar: The Care and Use of that Gun Trust & Ancillary Documents Tucked Away in Your File Cabinet

On Tuesday, April 6, 2021, you and your friends and family members. are invited to the first of what I hope will become an ongoing series of Gun Trust webinars. In fact, I will conduct two Gun Trust & Firearms Law webinars that day:

The GunTrust & Firearms Law Breakfast Webinar from 7:00 AM to 8:00 AM Mountain Time that morning, and

The GunTrust & Firearms Law Lunch Webinar from Noon to 1:00 PM Mountain Time.

In the webinar, I will review important provisions of your firearms trust and explain again how to use the various ancillary documents that may have come with your trust. There may even be time for questions.

 No need to attend both webinars because they will cover the same topic:

My intent is to conduct additional webinars on the first Tuesday of each month, webinars discussing the safe, proper, and legal use of firearms. More on this in another email on another day. For now, please sign up for either the Breakfast or the Lunch webinar at the links below. Again, feel free to invite family members and friends.

The Gun Trust and Firearms LawBreakfast Webinar – Tuesday, April 6, 2021, 7:00 AM to 8:00 AM Mountain Time

The Gun Trust and Firearms Law LunchWebinar – Tuesday, April 6, 2021, Noon to 1:00 PM Mountain Time

Important Notices:

Neither of these webinars establish a lawyer-client relationship, especially given the general nature and applicability of the information presented and the fact that both clients, friends, and family may attend. To state this another way: I will not be offering legal advice in any of these webinars; what I say in the webinars is of general applicability and not geared necessarily to your particular situation.

If you would like to talk to me about your specific situation, please contact me via email at gregory@gtaglaw.com or call me at 801-636-5264.

For those who wish to establish a firearms trust, you can read more about the three versions of firearms trusts I draft by visiting my website.

One Word: Neat – Silencer Shop’s Kiosks for NFA Trust Paperwork

I wrote about Silencer Shop’s kiosks a few months ago. Here’s a video that demonstrates how they work. The title of the video is a bit misleading. You don’t set up or buy an NFA firearms trust on the Kiosk, rather you initiate the government-required paperwork–your Form 4, for example– so you can use your trust to purchase an NFA item.

41 F: Fingerprints and Photographs Quick as a Wink – Somebody’s Taking Care of Their Customers

WqrSS-660x657ell, somebody’s on the ball. The people at Silencershop.com just announced some new technology they developed that will make complying with ATF 41F much easier for the responsible persons of trusts and entities to submit their fingerprints and photographs.

Sometime before July 13th, when ’41F’ finally takes effect, Silencer Shop will ship out 300 fingerprint-scanning kiosks to select Silencer Shop ‘Powered By’ dealers across the country. Then, after July 13th, when a customer purchases a suppressor from the Silencer Shop website, they select their local dealer of choice, submit payment for both the suppressor(s) and NFA transfer tax(es) and if necessary, uploads their trust or LLC documents. In return, Silencer Shop will email each customer a unique QR code that they can take to those select Powered By dealers to scan and then follow the instructions to use the kiosk to capture an FBI-approved set of fingerprints. (Certain restrictions apply and will be outlined prior to launch.)

The customer’s prints are then securely transmitted to Silencer Shop’s headquarters and stored offline. All of your information is then submitted along with the BATFE Form 4 to initiate the transfer application process. The result is that customers and if needed, their ‘responsible persons’ (we’ll get to that part) will only have to be fingerprinted once no matter how many silencers they buy over the course of months and years to come. And since individuals no longer require a Chief Law Enforcement Officer (CLEO) sign-off, both individuals and entities will also be able to utilize the kiosk system.

The photograph requirement will be addressed by a custom Silencer Shop App for iOS and Android that will take passport-sized images that will also be transmitted to Silencer Shop HQ. Per the BATFE rules, every two years the photographs will be need to be retaken. Customers will simply use the Silencer Shop App to grab another selfie.

Sounds cool to me. Free enterprise at its best–in spite of the obstacles.

Required Reading, Then and Now

Jefferson LCBTwo things interest me about the two quotes below: First, that original material was written in 1764–in Italy–by Cesare Beccaria in his treatise On Crimes and Punishments. Yes, I know. It sounds like something right out of an NRA press release in response to yet another move by the [name your president] to implement by executive order more “common sense” restrictions on firearms. But no, Beccaria was a political philosopher of some renown, whose work many of the Founders thought important enough to use as source material for the founding documents of this nation. Jefferson, for one, copied the passage below into his Legal Commonplace Book, a sort of journal the author of the Declaration of Independence used to keep track of important ideas–I assume his and of others. Jefferson entered the Beccaria quote into his journal in the original Italian. The first quote below is the English translation of Italian, which appeared in in 1809 and which Jefferson owned.

That brings me to the second interesting thing: The two quotes are essentially the same quote from Beccaria, the first an 1809 translation, the second a 1963 translation. You can find the second all over the Internet. (I originally found it in a book I’m reading, That Every Man Be Armed by Stephen P. Holbrook, an excellent history of the Second Amendment, going all the way back to the Greeks and Romans.)

So you can easily notice the differences, I’ve color keyed the corresponding words in each translation. (And yes, I realize that the second translation has an ellipsis.) I prefer the second, newer, and I’d say more elegant translation. Whatever your preference, Becarria offers up some good food for thought, even today.

“A principal source of errors and injustice are false ideas of utility. For example: that legislator has false ideas of utility who considers particular more than general conveniencies, who had rather command the sentiments of mankind than excite them, who dares say to reason, ‘Be thou a slave;’ who would sacrifice a thousand real advantages to the fear of an imaginary or trifling inconvenience; who would deprive men of the use of fire for fear of their being burnt, and of water for fear of their being drowned; and who knows of no means of preventing evil but by destroying it.

The laws of this nature are those which forbid to wear arms, disarming those only who are not disposed to commit the crime which the laws mean to prevent. Can it be supposed, that those who have the courage to violate the most sacred laws of humanity, and the most important of the code, will respect the less considerable and arbitrary injunctions, the violation of which is so easy, and of so little comparative importance? Does not the execution of this law deprive the subject of that personal liberty, so dear to mankind and to the wise legislator? and does it not subject the innocent to all the disagreeable circumstances that should only fall on the guilty? It certainly makes the situation of the assaulted worse, and of the assailants better, and rather encourages than prevents murder, as it requires less courage to attack unarmed than armed persons.”

Though you can find the following translation of the quote by Paolucci in a number of places, I found it here.

False is the idea of utility that sacrifices a thousand real advantages for one imaginary or trifling inconvenience; that would take fire from men because it burns, and water because one may drown in it; that has no remedy for evils, except destruction. The laws that forbid the carrying of arms are laws of such a nature. They disarm only those who are neither inclined nor determined to commit crimes….Such laws make things worse for the assaulted and better for the assailants; they serve rather to encourage than to prevent homicides, for an unarmed man may be attacked with greater confidence than an armed man.

For those who would prefer practicing their Italian, here’s the quote in Italian, as it appeared in Jefferson’s Legal Commonplace Book:

“Falsa idea di utilità è quella, che sacrifica mille vantaggi reali, per un inconveniente o immaginario, o di poca conseguenza, che toglierebbe agli uomini il fuoco perchè incendia, e l’acqua perchè annega; che non ripara ai mali, che col distruggere. Le leggi, che proibiscono di portar le armi, sono leggi di tal natura; esse non disarmano che i non inclinati, nè determinati ai delitti, mentre coloro che hanno il coraggio di poter violare le leggi più sacre della umanità è le più importanti del codice, come rispetteranno le minori, e le puramente arbitrarie? Queste peggiorano la condizione degli assaliti migliorando quella degli assalitori, non iscemano gli omicidi, ma gli accrescono, perchè è maggiore la confidenza nell’assalire i disarmati, che gli armati. Queste si chiaman leggi, non preventrici, ma paurose dei delitti, che nascono dalla tumultuosa impressione di alcuni fatti particolari, non dalla ragionata meditazione degl’inconvenienti, ed avvantaggi di un decreto universale.”

ATF 41 F — The Official Document

I don’t think I ever posted a link to the official (or at least, the official looking) ATF 41 F as it appeared in the Federal Register. Here it is.

To refresh your memory, ATF 41F affects the firearms trusts (aka gun trusts and NFA trusts). It goes into effect on July 13, 2016. Until then, firearms trusts are the most effective and least intrusive way for you to purchase NFA items, including suppressors or silencers–in my humble opinion. After July 13, 2016, I think firearms trusts remain the best way to purchase those items, for most–but not all–the same reasons. Again, in my humble opinion.

No, the CLEO’s signature on individual applications will no longer be required, and

Yes, so-called “responsible persons” will be required to provide fingerprints and photographs, BUT

-Firearms trusts set up a structure that protects against unwise and often uninformed use/misuse of NFA firearms while you’re alive, misuse that can result in severe penalties and fines, and

-Firearms trusts establish a framework for sharing NFA items while you’re alive, a framework not available to people who purchase NFA items in their capacity as individuals, and

-Firearms trusts provide a mechanism for distributing your prized firearms to your beneficiaries when you die, again without running afoul of the law.

No, for my money, a well-drafted firearms trust remains the best way to purchase NFA firearms, now and after July 13, 2016.

Why Not Use My Revocable Living Trust as a Gun Trust?

Question Mark_YellowI just took a call from a fellow who asked a very good question: Why not use my revocable living trust as a gun trust? The short answer to that question is, “because.”

But if that’s too short for you, here’s a longer version I gave him–in bullet points:

  • Guns are not like virtually any other property. They are regulated. Those regulations come with stiff fines and possible imprisonment if you should accidentally violate them. Gun trusts take that into account. Regular trusts don’t.
  • To transfer your home or your bank account, it’s a relatively simple matter of signing a deed or changing the name on the account. You don’t have to worry about who the transferee is and what he’s been up to lately. To transfers any firearms, you always have to be worried about what the transferee has been up to recently or even way back when because if he’s been up to no good, he could be a “prohibited person,” and you could get into trouble for selling or giving your gun to him.
  • Transferring–giving or selling–an NFA item is even more problematic. With each and every transfer, there’s fingerprints, photos, forms, signatures, and the like AND a $200 tax AND a long waiting period before you can actually, physically transfer the darn thing. What if when you die or become incapacitated, your trustee doesn’t understand that? Big problems could ensue. (Yes, I know that the transfer tax doesn’t apply when the transfer is from the estate of a decedent to a lawful heir.)
  • A well-drafted gun trust takes care of the problems I just described because it comes full of instructions and warnings about the relevant law and issues–guidance, if you will–so your trustee knows what and what not to do.
  • A well-drafted gun trust also allows for sharing of NFA items without incurring the wrath of the gun gods. I’ve yet to see a regular revocable living trust that does that.
  • Finally, know this: when you buy an NFA item using a trust, you have to send a copy of the complete trust to the BATFE, which keeps it on file. Do you want to send them your revocable living trust that names all your children, speaks of how you want to disinherit your youngest and how you want the gold buried in your backyard to go to your brother Willard and that you want $1,000,000 of your estate to go to the American Red Cross? I wouldn’t either. A well-drafted gun trust won’t disclose that kind of information.

Anyway, that’s why you don’t want to use your regular revocable living trust as a gun trust.

Empty Chamber Indicator — Update

Ok, so in my first post on the Empty Chamber Indicator, I referred rather cryptically to the television production Behind the Scenesindicating I might report back later. Well, it’s later.

Yesterday I returned to my office to find a phone message from a man asking me to call Michael Alexander, the producer of Behind the Scenes, which, it turns out, produces short informational documentaries to fill a three-minute space on PBS between the ending of one program and the beginning of another. On commercial TV, that space is filled by commercials.

As I mentioned yesterday, the list of people who’d been featured on Behind the Scenes was pretty impressive, including Colin Powell and G.H.W. Bush and many similar personalities from the world of government, business, medicine, you name it.

The phone message said that Mr. Alexander wanted to talk to me about doing a short documentary on estate planning in general, but more particularly on gun trusts (also known as NFA trusts). I was impressed. First, how did they find me? My blog? My Facebook page? LinkedIn? Other sites I’m listed on? I was also skeptical.

And then Mr. Alexander returned my call. Apparently the company’s legit. And they were interested in talking to me about doing a short documentary on gun trusts. Oh, and as part of the bargain, I needed to fork over some dollars.

Now I don’t say this disparagingly. I don’t think I was being scammed. You see, not only did they distribute their short films through PBS–some 300+ stations, according to Alexander–they also would make sure even shorter versions of the PBS documentaries were shown 50 times on any five TV stations I chose in Utah and Wyoming (I’m not sure whether that was 50 total or 50 x 5 or 250 times). And, they would also “narrowcast” the programs to targeted audiences in the Internet. That’s a lot of publicity.

But it wasn’t free. I won’t disclose the terms here because, well, because. Suffice it to say, it wasn’t cheap, though for the right firm at the right time, doing the deal with Mr. Alexander could be a good decision.

Fame is fleeting. Imagined fame even more fleeting. Oh well.

Quote for the Day

Failure to address the new issues raised by Rule 41F will expose owners of firearms trusts to the risk of committing a new kind of accidental felony, i.e. related to a failure to document an RP [responsible person]. Firearms trusts must be reviewed–and likely revised–to clarify the roles of the parties involved and whether or not they are RPs. If new NFA applications are made following implementation, it might be advisable to limit the number of “responsible persons” as defined by Rule 41F to avoid substantial paperwork or risking liability for unlawful transfer of an NFA firearm. The legal consequences of failing to comply with the NFA can be severe, including fines of up to $250,000 and up to 10 years in prison, as well as confiscation of the firearm(s) involved.

C. Dennis Brislawn, JD and Matthew T. McClintock, JD, WealthCounsel Federal Rules Brief: The Impact of BATF Rule 41F on Firearms Trusts

NFA Firearms in an Estate: What’s an Executor (or Trustee?) to Do?

Question Mark_YellowYou’re the executor or personal representative of an estate (they’re the same thing, by the way) or a trustee of a trust. The owner of some NFA firearms has died, and you’re left to deal with the aftermath. (Of course, the real “owner” of any NFA arms in a trust is the trustee, but generally, the initial trustee is the grantor of the trust, who we on the outside looking in, view as the owner.) What can you do with the NFA firearms? If you turn them over to the decedent’s heir under the will or the beneficiaries of his trust, do you have to pay the transfer tax?

Fortunately, the BATFE has been fairly helpful on this point, though it could have been more clear. On September 5, 199, the Bureau issued a letter in which it said the following:

If there are unregistered NFA firearms in the estate, these firearms are contraband and cannot be registered by the estate. The executor of the estate should contact the local ATF office to arrange for the abandonment of the unregistered firearms.

So now you know what to do with unregistered NFA items–if you’re an “executor of the estate,” that is. Did the Bureau also mean “trustee of a trust”? Maybe. Later in the same letter, after the word “heir” has been repeated a number of times, we do see this language:

NFA firearms may be transferred directly interstate to a beneficiary of the estate.

Beneficiary. Is that the same as an heir? Though they are often used interchangeably, the two terms are not precise synonyms. Often the word heir is use to define someone who receives property under a will or via a state’s intestacy laws. Beneficiary, on the other hand, is just as often used to describe someone who receives property under trust. Again, they are also used interchangeably. How is the BATFE using the terms in this letter? Inquiring minds would like to know. Maybe this line from the letter helps,

A lawful heir is anyone named in the decedent’s will or, in the absence of a will, anyone entitled to inherit under the laws of the State in which the decedent last resided. (emphasis supplied)

Hmmm. This sounds like intestacy, but is that all? Does “under the laws of the State” mean the same thing as “operation of law” (see below)?

Well, recently, the Bureau issued the final Rule 41F, which affects so-call NFA or gun trusts, among other things:

It [the new rule] also adds a new section to ATF’s regulations to address the possession and transfer of firearms registered to a decedent. The new section clarifies that the executor, administrator, personal representative, or other person authorized under State law to dispose of property in an estate may possess a firearm registered to a decedent during the term of probate without such possession being treated as a “transfer” under the NF A. It also specifies that the transfer of the firearm to any beneficiary of the estate may be made on a tax-exempt basis. (emphasis supplied)

Such transfers are not taxable transfers because they are not “voluntary”; that is, the executor, personal representative, etc. must follow the terms of the will (or trust?) or law. He or she has no choice. That’s all fine and dandy, but are transfers from trust to beneficiaries tax exempt? Come on. Tell us BATFE. You can do it.

In the commentary on the new rule, the Bureau gets a clear as it’s probably going to get in answering that question, when it says:

Transfers of NFA firearms from an estate to a lawful heir are necessary because the deceased registrant can no longer possess the firearm. For this reason, ATF has long considered any transfer necessitated because of death to be involuntary and tax-free when the transfer is made to a lawful heir as designated by the decedent or State law. However, when an NFA firearm is transferred from an estate to a person other than a lawful heir, it is considered a voluntary transfer because the decision has been made to transfer the firearm to a person who would not take possession as a matter of law. Such transfers cannot be considered involuntary and should not be exempt from the transfer tax. Other tax-exempt transfers—including those made by operation of law—may be effected by submitting Form 5. Instructions are provided on the form. (emphasis supplied)

Operation of law would seem to include transfers mandated by language in trusts, trusts which are created under state law, laws that include fiduciary standards that compel trustees to carry out the wishes of the grantor of the trust, whose wishes are stated in the language of the trust. I’m hanging my hat on that.

There are a couple of other things I’d do to make sure that hat fits in every circumstance, but I won’t go into that here.

 

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