Estate Planning and Estate Administration Issues Posed by Firearms

Estate Planning and Estate Administration Issues Posed by

Firearms

Presented to the Estate Planning Council of Middle Tennessee on

September 12, 2016

By Robin L. Miskell, Esq. Dickinson Wright PLLC

Why do you need to know something about firearms?

• The number of households that have firearms range from 38% to 45% depending on the source.

• The number of households that have Title II firearms is much smaller, but the consequences of violating federal laws are severe, including up to a $250,000 fine and 10 years in prison, and the right to possess such firearms in the future.

• To provide a valuable service to clients that own firearms.

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The Basic Right of the Second Amendment of the United States Constitution

• “A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.”

• One interpretation is an individual right theory and to prohibit legislative bodies from restricting right (right of the people)

• The other interpretation is a collective rights theory providing that the framers intended only to restrict Congress from legislating away a state's right to self-defense (well regulated militia)

• There is a series of Supreme Court cases that resulted in the strengthening of the interpretation of the Second Amendment as an individual right

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Agenda

• Definition of firearms under federal and state law (with pictures)

• Applicable federal and state laws for firearms

• Estate planning with firearms

• Issues and concerns in estate and trust administration posed by firearms

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What is the definition of a firearm under the Gun Control Act?

• The Gun Control Act (GCA) provides that a firearm includes the following weapons:

– Pistols, revolvers

– Rifles, shotguns

– Frames or receivers

– Machineguns

– Silencers

– Destructive devices

– All other weapons that expel a projectile by the action of an explosive.

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What is the definition of a firearm under the NFA?

• The National Firearms Act provides that a firearm means:

– Machineguns

– Suppressors/silencers

– Short-barreled shotguns

– Short-barreled rifles

– Destructive devices

– Any other weapons

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What is a machinegun?

• Machine guns are “any weapon which shoots, is designed to shoot, or can be readily restored to shoot, automatically more than one shot, without manual reloading, by a single function of the trigger, including any combination of parts.”

• Must be made before May 19, 1986.

• Some parts do not qualify as Title II parts – slide fire and crank fire.

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Thompson Submachine Gun

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Machinegun Parts

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Suppressors/silencers

• Suppressors/silencers – “any device for silencing, muffling, or diminishing the report of a portable firearm, including any combination of parts.”

• These are becoming more common to reduce damage to eardrums.

• Commonly referred to as “cans.”

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Suppressors/Silencers

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Short Barreled Shotguns

• Short-barreled shotguns – a shotgun with a barrel length of less than 18 inches or an overall length of less than 26 inches. (Example: sawed-off shotguns) – Note: The ATF uses a specific method for measuring the

barrel length of a gun by using a dowel rod to stick into the barrel to the closed bolt or breech face and marking the end of the barrel on the dowel rod to measure the length of the barrel.

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Short Barreled Shotgun

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Weapon Made from a Shotgun

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Short Barreled Rifle

• Short barreled rifles – a rifle intended to be shot from the shoulder with a barrel length of less than 16 inches or an overall length of less than 26 inches.

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Short Barreled Rifle and Weapon Made From Rifle

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Destructive Devices

• Destructive devices – any explosive, incendiary or poison gas (i) bomb (ii) grenade (iii) rocket having a propellant charge of more than 4 ounces (iv) missile having an explosive or incendiary charge of more than 1/4 oz. (v) mine, or any type of weapon which will expel a projectile and which has any barrel with a bore greater than 1/2” in diameter or any combination of parts.

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Destructive Devices U.S. Rocket Launcher (Bazooka)

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Destructive Devices Street Sweeper

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Destructive Devices Mortar

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Any Other Weapons (AOWs)

• Any other weapon (AOW) – any weapon or device capable of being concealed on the person from which a shot can be discharged through the energy of an explosive; a pistol or revolver having a barrel with a smooth bore designed to fire a fixed shotgun shell; and weapons with a combination shotgun and rifle barrels 12 inches or more, less than 18 inches in length, from which only a single discharge can be made from either barrel without manual reloading.

• Example: Cane guns or pen guns.

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Smooth Bore Shot Revolver

Smooth Bore, Shot-Pistol


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Tear Gas Pen Guns


Wallet Holster

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Antiques

• An antique firearm is a firearm (other than a machinegun or destructive device): – either manufactured in or before 1898, or

– replica of gun made in or before 1898 if not designed or redesigned for using rimfire or conventional centerfire fixed ammunition, or uses rimfire or conventional centerfire fixed ammunition which is no longer manufactured in the U.S. and is not readily available, or

– any muzzle loading rifle, muzzle loading shotgun or muzzle loading pistol designed to use black powder. 18 USC §921(a)(16).

• These weapons can be purchased without going through a Federal Firearms License (“FFL”) holder.

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Curios and Relics

• Curios and relics are defined as:

– Manufactured 50 years prior to current date;

– Firearms which are of special interest to collectors by reason of some quality other than is associated with firearms intended for sporting use or as offensive or defensive weapon; or

– Certified by a museum.

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Curios and Relics

• A person may obtain a license to collect curios and relics. 18 USC §923(d)(1)(B).

– In the case of a corporation, partnership or association, any individual possessing power to direct management and policies of the corporation, partnership or association may obtain a license

– a trust is not included in the definition of a person and

may not obtain a license

• If a person has a curios and relics license, such weapons may be obtained without going through a FFL holder.

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What is the definition of firearm under Tennessee law?

• Prohibited weapons include, unless the person is in compliance with the NFA:

– Explosive or explosive weapon (includes bombs, grenades, etc.);

– Device designed to shoot an explosive weapon;

– Machine gun (defined as any firearm that is capable of shooting more than two (2) shots automatically, without manual reloading, by a single function of the trigger);

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What is the definition of firearm under Tennessee law? (continued)

– Short barrel rifle or shotgun;

– Firearm silencer;

– In addition to NFA - Hoax device (means any device that reasonably appears to be or is purported to be an explosive or incendiary device and is intended to cause alarm or reaction of any type by an official of a public safety agency );

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What is the definition of firearm under Tennessee law? (continued)

– In addition to NFA - Knuckles (means any instrument that consists of finger rings or guards made of a hard substance and that is designed, made or adapted for the purpose of inflicting serious bodily injury or death by striking a person with a fist enclosed in the knuckles);

– Other implement to cause serious injury that has no common or lawful purpose.

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Agenda - How are firearms regulated?

• NFA

• GCA, amended the NFA

• How to Make, Transfer, and Purchase Title II Firearms

• ATF Regulations - Final 41F regulations

• Transportation

• Executive Action

• Tennessee Law

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How are firearms regulated? Federal law - NFA

• National Firearms Act (“NFA”) - The NFA was enacted in 1934 under the Sixteenth Amendment (Congress’ power of taxation) to curtail the gangland crimes.

• The $200 transfer tax was implemented in 1934 and remains in force today. The amount of the tax can be compared to $3,438 in 2013.

• The NFA is located in the Internal Revenue Code.

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How are firearms regulated? Federal law - NFA (continued)

• The NFA governs the purchase, sale, transfer, use and ownership of certain “Title II” firearms, including machineguns, suppressors/silencers, short barreled shotguns, short barreled rifles, destructive devices, and any other weapon.

• The penalty for unlawfully possessing a regulated firearm may be up to $250,000 fine and ten years in prison (26 USC §5871), along with forfeiture of the firearm as illegal contraband (26 USC §5872).

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How are firearms regulated? Federal law - GCA (continued)

• Gun Control Act of 1968 (“GCA”) - Title I is the original Gun Control Act and Title II was the incorporation of the 1934 NFA into the Gun Control Act.

• The GCA was enacted to cure the constitutional flaw in the NFA found by the Supreme Court in Haynes v. U.S., 390 U.S. 85 (1968).

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GCA

• Interstate firearms transfers are prohibited except among licensed manufacturers, dealers and importers, commonly referred to as federal firearms license (“FFL”) holders.

• A dealer cannot sell a firearm to an out of state resident unless it is a sale of a long gun (rifle or shotgun) by personal delivery and the dealer knows that the sale is in compliance with the law of the state of the resident.

• No sales of pistols to out of state residents.

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GCA (continued)

• In 1986, the GCA was amended by the Firearm Owner’s Protection Act (“FOPA”) in 1986 to prohibit possession of machineguns except possession of machineguns by government agencies and those persons in possession as of the date of the amendment (May 19, 1986).

• Machine guns may be lawfully possessed in 1986 may continue to be sold and transferred through application to the Bureau of Alcohol, Tobacco and Firearms (“ATF”).

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GCA (Prohibited Possessors)

• The GCA lists prohibited possessors of regulated firearms who pose a threat to public safety :

– A person convicted of a crime punishable by imprisonment exceeding one year;

– A person who is a fugitive from justice;

– A person who is an unlawful user of or who is addicted to a controlled substance;

– A person who has been adjudicated as a mental defective or who has been admitted to a mental institution;

– An alien who is unlawfully in the U.S. or is admitted under a nonimmigrant visa;

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GCA (Prohibited Possessors)

Continued list of persons prohibited from possessing firearms:

– A person who has been discharged from the Armed Forces under dishonorable conditions;

– A person who has renounced his U.S. citizenship;

– A person subject to a court order which restrains the person from harassing, stalking or threatening an intimate partner or partner’s child;

– A person who has been convicted of a misdemeanor crime of domestic violence.

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How to Make, Transfer and Purchase Title II Firearms

• The manufacture of a Title II Firearm requires application and approval from the ATF (Form 1 – application to manufacture firearm) and payment of a $200 tax stamp and registration of the firearm in the National Firearm Registration and Transfer Record (NFRTR).

– The making of a firearm includes cutting the barrel of a shotgun or rifle.

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How to Make, Transfer and Purchase Title II Firearms (continued)

• The purchase or transfer of a Title II firearm requires application, the filing of a Form 4, and approval from the ATF and payment of a $200 tax (except AOWs which only require a $5 tax stamp unless making one) and registration of the firearm in the NFRTR.

• Distribution of estate firearms is tax free (use Form 5 – tax-exempt transfer of corpus of trust to beneficiary or during a probate from an estate to a beneficiary or heir)

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Final ATF Regulations 41F

• The Final Regulations were effective July 13, 2016. The proposed regulations were issued on September 9, 2013 although the final regulations were substantially different.

• The goal of the final rule was to ensure that the identification and background check requirements apply equally to individuals, trusts and legal entities who apply to make or receive NFA firearms.

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Final ATF Regulations 41F (cont’d)

• Prior to new regulations, gun trusts were beneficial because (i) only one Trustee must comply with background check and all Trustees share in ability to use and control; and (ii) no consent or notification to Chief Law Enforcement Officer was needed for a Trustee, but was for an individual.

– Note that Tennessee was one of the few states that enacted a law that said that approval “shall issue.” In other words, the CLEO did not have any discretion, which was a complaint in many other states. T.C.A. §39-17-1361.

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• Defines a “responsible person” in relation to a trust, partnership, association, company or corporation.

– For example, a responsible person now includes all Trustees.

– A responsible person does not include a beneficiary of a trust, if the beneficiary does not have the capability to exercise powers or authority to direct management of trust.

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• Requires a responsible person to complete ATF Form 5320.23, to submit photographs and fingerprints when transferring or making of an NFA firearm;

• Requires notification of the local chief law enforcement officer (“CLEO”) of an application for the transferring or making of an NFA firearm.

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• Eliminates the requirement for an individual to obtain certification signed by the CLEO.

• If a new Title II firearm is added to a gun trust, the new rules apply, unless gun trust has already complied with new rules within the preceding 24 months.

• Adds a new section to address the possession and transfer of firearms registered to a decedent.

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Transportation

• Interstate transfers by a person are prohibited. A FFL holder may ship to another FFL holder.

• Title I Firearms:

– A person may ship firearms to other individuals in same state but there are various shipping requirements beyond the scope of this presentation.

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Transportation (continued)

– A person must transfer firearm to a FFL holder in the state of the recipient. Then the recipient must fill out a Form 4473 to pick up the firearm.

– A person may mail his own rifle or shotgun to himself in care of another person but the recipient should not open the package and keep it somewhere safe.

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– A person must transfer firearm to a FFL holder in the state of the recipient. Then the recipient must fill out a Form 4473 to pick up the firearm.

– A person may mail his own rifle or shotgun to himself in care of another person but the recipient should not open the package and keep it somewhere safe.

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• Title II Firearms:

– A transfer to another person must be after application and approval of a Form 4 and payment of a tax. Such transfer may be made in-state after approval of the Form 4.

– A transfer to another person out of state must be through a FFL holder in the transferor state and in the transferee state.

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– If you are moving to another state with a Title II firearm, you must file and receive approval of a Form 5320.20 (Form 20).

– NFA firearms may be transferred directly interstate to a lawful heir without going through a dealer. If an out of state beneficiary comes and picks up the firearm from the Personal Representative or Trustee following approval of transfer by the ATF, transfer through a FFL holder is not needed.

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Executive Action

• Issued by President Obama on January 4, 2016 (not legally binding and does not follow definition of engaging in business) – Clarifies that if you are in the business of selling firearms, you must get

a license and conduct background checks. The Executive Action provides that “it doesn’t matter where you conduct your business – from a store, at gun shows, or over the internet: If you’re in the business of selling firearms, you must get a license and conduct background checks.” The ATF has clarified that there is no specific threshold number of firearms purchased or sold that triggers the license requirement, but that it is important to note that even a few transactions when combined with other evidence can be sufficient to establish that a person is “engaged in the business.”

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Executive Action (continued)

– Engaged in the business is defined in 18 USC Section 921(a)(21)(C) as “a dealer who devotes time, attention, and labor to dealing in firearms a regular course of trade or business with the principal objective of livelihood and profit through the repetitive purchase and resale of firearms, but such term shall not include a person who makes occasional sales, exchanges, or purchases of firearms for the enhancement of a personal collection or for a hobby or who sells all or part of his personal collection of firearms.”

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Tennessee Law

• Prohibited firearms (discussed above) – NFA firearms plus hoax devices and knuckles – States can be more restrictive

• No prohibition on assault rifles (if properly registered under the NFA)

• No state registration of firearms

• No magazine capacity restrictions

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Tennessee Law (continued)

• Prohibited transfers:

– sell, loan, gift a firearm to a minor (exceptions)

• Defense if for sporting purposes

– sell to intoxicated person

– sell to a prohibited possessor discussed above under federal law, or to a:

• Person convicted of stalking

• Person addicted to alcohol

• Committed to be mentally defective or in an institution

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• Tennessee distinguishes between possession and carrying of firearms.

– It is unlawful to carry a firearm unless:

• it is unloaded,

• you are at your own premises, residence or place of business

• you have a carry permit for a handgun, or

• you are using it for lawful hunting, trapping, fishing, camping, sport shooting, or other lawful activity.

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• Exception to prohibition of carrying a weapon if person has loaded weapon in vehicle and the person is not prohibited from possessing or purchasing a firearm and is in lawful possession of the vehicle.

• The holder of a carry permit may transport and store a firearm or firearm ammunition in the motor vehicle while utilizing any public or private parking area if: vehicle is parked legally, firearm kept from view if permit holder in vehicle or locked within trunk, glove box, or interior if permit holder is not in vehicle.

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– Summary – You can carry a loaded firearm only if for hunting or sporting purposes or you are at your own residence or place of business, or you are in your vehicle and you are not a prohibited possessor.

• In other words, you can load your firearm at home, carry it in your car to work, or go to a shooting range or hunt, and then return to home with your loaded firearm. You can’t have a firearm in a parking lot unless have a carry permit.

– You can carry a handgun with a permit (either open or concealed).

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Estate Planning with Firearms

• When is a gun trust needed? A gun trust is useful if a person owns Title II firearms. It is informal, private and cost-efficient (as compared to other options) and achieves the following objectives:

– Prevention of an accidental felony

– Allows temporary use by others (beneficiary or trustee)

– Provides guidance on possession and transfer after death or disability

– Avoids probate and simplifies the process of transfer upon death or disability

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Estate Planning with Firearms (continued)

• Is a gun trust needed with only Title I weapons? - No. A client does not need a gun trust if a person owns only rifles, shotguns and pistols (“Title I guns”), although the personal representative or trustee must still be careful to follow state law in transferring these types of guns. We will discuss estate planning options for Title I guns below.

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• Is a gun trust needed if a person owns one Title II firearm? Possibly not, if: – He or she stores the firearm in a place for which he or

she only has the key.

– He or she does not share the firearm or let anyone else borrow the firearm.

– He names a Personal Representative that understands the significance of Title II firearm transfers, or advises his or her Personal Representative to contact an FFL holder for assistance.

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• Other options other than a gun trust for Title II weapons:

– Corporations:

• Must file an annual report and must pay an annual license fee;

• There is a risk of administrative action or dissolution resulting in criminal violations.;

• If using this type of entity, one cannot use a generic form of bylaws for firearms.

• Loss of privacy due to public company filings

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– Limited Liability Companies: • Provides a liability shield

• Is perpetual

• The member can be a regular revocable trust

• Faster to obtain tax stamp because only need to provide ATF with Articles of Organization and Certificate of Good Standing. Do not need to send in Operating Agreement.

• Can hold a Curio and Relics License (whereas a trust cannot)

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Estate Planning – Gun Trust

• What are the requirements of a gun trust?

– Same requirements as a trust:

• Valid trust agreement under state law

• Settlor has capacity

• Settlor indicates intention to create a trust

• Trust has a definite beneficiary

• Single person is not sole trustee and beneficiary (results in invalid trust). Many trusts found online have this problem.

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• The Trust should immediately hold res or something of value, e.g. the settlor may contribute ten dollars by attaching a ten dollar bill to the Trust upon execution of the Trust.

– Other requirements:

• Permits legal transfers of firearms by gift, sale, and sharing to persons that are not prohibited possessors (needs to be spelled out who is a prohibited possessor, or at least refer to the federal and state laws).

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• Trust should provide for what happens if a Trustee or a beneficiary becomes a prohibited possessor or disqualified person.

• There should be no power to change trust name. Because the gun trust is registered in the NFA Registry, a change in the trust name would require re-registry of the firearm.

• Trust describes some of the Trustee’s duties to ensure proper transfer, use and identification of beneficiaries based on federal and state law, including the proper procedure to transfer to beneficiaries.

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– Usually a gun trust is revocable, so that the Settlor may make changes. Anyone can be designated as a co-Trustee of the trust. With the gun trust as the registered owner, the actual ownership of the trust can be easily changed. As long as the trust remains the registered owner, no transfer has occurred. This may be useful in the event that future federal or state legislation is enacted banning certain weapons.

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– There are varying opinions on whether a gun trust should hold Title II and Title I weapons. The prevailing sentiment seems to be that a gun trust should hold only Title II weapons. However, if the client owns Title I weapons, these should be addressed in the client’s estate plan by other means.

– To be safe, no Trustee should be under 21.

– Transfers to minors should be controlled until reach a certain age.

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– If more than one person is a Trustee, the client should consider that not all Trustees should be treated alike. Consider having only one Trustee to have the ability to sell or transfer the firearms during his lifetime if competent, then upon his death or incapacity, another Trustee may have the power to sell firearms.

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– The Trust may provide that a Trustee has the power and authority to allow a person to provide temporary use of the firearms without committing a felony if for a valid purpose (target shooting).

– The Trust should have a provision to prevent a generation-skipping transfer (“GST”) Tax by including a testamentary general power of appointment in the trust for a child if there is a possibility that a generation-skipping transfer will occur, or allocate GST exemption upon death of Settlor.

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– The Trust should have a list of inventory with the serial numbers listed.

– Commonly, a gun trust will have forms attached to change the beneficiary or successor Trustee.

– Transfers to a gun trust require the payment of a transfer tax. If a gun trust purchases the firearm, only one payment of the transfer tax is required.

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Estate Planning – Gun Trust Not Used Title II Firearms

• Title II Firearms – The issue is who is the Personal Representative and is he/she capable of handling Title II firearms.

– The Personal Representative must be an acceptable person (not a prohibited possessor) to receive Title II firearms if not held in a gun trust.

– The Will should require that the Personal Representative satisfies all of the qualifications prior to appointment.

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• There are not many good options other than a gun trust to name a Personal Representative, but the following are a few possibilities:

– If the client has a significant collection, he or she may desire to designate a Personal Representative that is knowledgeable about Title II firearms. Then have that Personal Representative transfer remaining property to a trust with spouse/descendants as Trustees/beneficiaries.

– Name a general Personal Representative and counsel them to get advice from attorney or FFL holder.

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– You could attempt to bifurcate the Personal Representative duties, but there is no statutory authority for this. To implement this procedure, the special Personal Representative or Special Administrator may have to get a court order to make this plan work. This worked in Pennsylvania, a non-UPC state.

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• Distribution provisions – To be comprehensive, you should include the restrictive language from the gun trust, such as a beneficiary may not be a prohibited possessor, federal and state laws apply to transfers, etc.

• A client may desire to name alternate recipients in case the first one does not qualify.

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Estate Planning – Gun Trust Not Used Title I Firearms

• For Title I firearms, commonly, in states that follow the Uniform Probate Code (UPC) (like Arizona), a client will use a separate statement designating certain personal property, including Title I firearms, to specific beneficiaries.

• In Tennessee, since it is not a UPC state, you would treat the disposition of firearms in the same manner as specific personal property, possibly as a specific gift in a Will.

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Estate Planning – Gun Trust Not Used Title I Firearms

• There are age restrictions for a firearm, and in Tennessee, as discussed above, a few other restrictions in order to possess a firearm, such as a person can’t be addicted to alcohol or adjudicated as a mental defective. As a result, it is a good practice to state in the specific gift provision that the beneficiary must be eligible under federal and state law to possess the firearm.

• The client may desire to name alternative recipients, just in case the first recipient is not eligible to possess the firearm.

• You may suggest that the client prepare a personal firearms record or inventory.

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Estate Administration Issues - Next of Kin

• What should “next of kin do” with firearms on the death of a loved one?

– Secure firearms.

– Determine if Decedent had a Will or a gun trust:

• If Decedent had a Will, the person that is named as the Personal Representative should contact an attorney to obtain appointment as the Personal Representative, administer the estate and avoid criminal liability. The Personal Representative has no authority until appointed by the court.

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Estate Administration Issues - Next of Kin

• If Decedent had a gun trust the person that is named as Trustee should contact an attorney to assist him or her in administering the Trust in accordance with its terms to avoid criminal liability.

• If Decedent had neither a Will nor a gun trust, contact an attorney to determine if a probate needs to be opened and who is entitled to priority as Personal Representative.

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Estate Administration Issues - Personal Representative

• What should a Personal Representative do if decedent owned firearms?

– Secure firearms in a safe location until further information is obtained regarding the type of firearms, whether they are registered, and who is the registered owner.

– Determine if the Decedent had a Will and/or a Gun Trust

– Obtain appointment as Personal Representative.

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• Contact attorney for guidance pursuant to federal and state law, if needed.

• Consider insurance for guns depending on value.

• If no beneficiary is designated to receive guns, have them appraised.

• Sell guns to reputable dealer.

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• If Decedent owned Title II firearms: – Prior to the new final regulations, a Personal

Representative could not possess a Title II firearm legally. The new regulations provide that a Personal Representative may possess a firearm legally during the period of administration. 27 CFR §479.90a.

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– If there is a significant collection of firearms, and the Personal Representative is not qualified or knowledgeable, consider obtaining an order from the court appointing a special administrator to take control of firearms for sale and transfer.

– If a specific heir is not designated, then the Personal Representative may transfer to any qualified person (as a sale) using Form 4.

– The Personal Representative must perform a reasonable investigation into the background and status of the designated recipient of the firearm.

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– The Personal Representative must file Form 5 and obtain approval for a non-taxable transfer to a beneficiary.

– The Personal Representative must avoid transfer across state lines without proper forms. A Form 20 is used for transporting firearms across state lines. However, after filing and approval of a Form 5, a Personal Representative may transfer a firearm to a beneficiary by personal delivery in state of decedent’s domicile.

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– The Personal Representative may need to obtain an appraisal of the Title II firearms. • An FFL Holder is usually a qualified appraiser of the Title II

firearms.

• The Personal Representative may not transfer the Title II firearms to the FFL Holder, or anyone else, for the purposes of appraisal. The Personal Representative must maintain possession and control at all times unless he or she obtains an order appointing a Special Administrator.

• The Personal Representative may need to take pictures, obtain the serial number and any other documents to provide to the appraiser for purposes of obtaining an appraisal.

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– Similarly, one may not transfer a Title II firearm to a person for the purposes of repair without a proper transfer Form. The owner must complete, file and obtain approval of a Form 5 to transfer the firearm to a reputable repairman. Although, the ATF does not consider the conveyance of a Title II firearm to a gunsmith for repair to be a “transfer”, the ATF strongly recommends that a Form 5 application be submitted for approval prior to conveying the firearm for repair.

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• Unregistered firearms:

– There is a risk that a Personal Representative will not recognize parts that consist of Title II firearms. One FFL Holder told the author of an estate of an older man that made machine gun parts that were legal at the time that he made them, but the ATF rescinded the letter stating that they were legal. Accordingly, the FFL Holder who was appointed as a Special Administrator found the parts and had to turn them over to the ATF as contraband.

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– If the firearms are Title II firearms and are unregistered or have no serial number, they must be turned over to law enforcement immediately (as soon as discovered) because they are contraband.

– Title I firearms also have federal and state requirements. The Personal Representative should also understand that a designated recipient may be eligible to receive a handgun, but ineligible for a license to carry. The Personal Representative should understand the laws on who is an eligible person to receive a firearm.

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Trust Administration Issues – Transfer by Trustee

• Transfer Requirements:

– If gun trust: • A properly drafted gun trust will provide instructions to the

Trustee on how to properly transfer the firearms or administer the guns by holding them in trust.

• It is possible that the laws have changed since the trust was drafted, so it is prudent to consult with an estate attorney that is familiar with firearms.

• A transfer Form 5 is required to be filed with the ATF if the firearm does not stay in trust, although it is a tax-free transfer to a beneficiary. It is not a tax-free transfer if it is sold to a beneficiary and a Form 4 will be required. See discussion below.

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Estate Administration Issues – Transfer by Personal Representative

– If no gun trust:

• Consult with an attorney to ensure compliance with state and federal laws. It may be possible to consult with an experienced FFL holder instead. There are attorneys that are also experienced FFL holders.

• The Personal Representative has authority to control and sell to a person that is entitled to possess a Title II firearm. The Personal Representative must file a Form 4 to transfer (sell) to any legal person and a Form 5 if the transfer is to a beneficiary.

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Trust Administration Issues - Trustee of Gun Trust

• If Trust is well written, it should give guidance regarding current federal and state laws, however, prudence would require checking federal and state laws to make sure they are current and the Trustee is not violating any prohibitions.

• Need to make sure the Trustee is: – Not committing negligent entrustment

– Not committing negligent maintenance

– Not transferring to a prohibited person

– Not criminally possessing any firearms (e.g. Title II firearms that are not registered)

– Preventing transfers to a State where a firearm would be illegal to possess.

– Follow proper transfer procedures by filing appropriate forms, especially if firearms are crossing state lines.

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• Educate Trustees on legal requirements in your state, administration process and forms

• Educate Beneficiaries on legal requirements, trust requirements, legal capacity and conditions of use.

• Maintain firearms

• Properly document use of firearms.

• Properly document transfer and purchases of firearms by maintaining inventory, including copies of forms with serial numbers.

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• Questions to ask prior to transfer of firearms:

– What kind of firearm

– Can the transferee possess it

– Is it precluded individually or under state law

– If item is contraband, contact the local ATF office for proper disposal to avoid criminal liability exposure.

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Questions?

If you have questions, please contact me at:

[email protected]

or

(602) 889-5329

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mailto:[email protected]

Estate Planning and Estate Administration Issues Posed by Firearms

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Transcript of Estate Planning and Estate Administration Issues Posed by Firearms