STIFFS, GIFTS, AND GATS: GUN TRUSTS ANDFIREARMS ISSUES IN PROBATE MATTERS

SEAN P. HEALYHealy Law Offices, P.C.

113 E. Houston St.Tyler, Texas 75702-8130

Tel: (903) 592-7566Fax: (903) 592-7589www.healylaw.com

genghis@healylaw.com

ALAN S. GASSMANGassman, Crotty & Denicolo, P.A.

1245 Court Street, Suite 102Clearwater, Florida 33756

Tel: 727-442-1200Fax: 727-443-5829

http://gassmanlaw.comagassman@gassmanpa.com

State Bar of TexasWHAT EVERY TEXAS LAWYER NEEDS TO KNOW

ABOUT FIREARMS LAWSeptember 14, 2017

Houston

CHAPTER _____

Sean P. Healy

Mr. Healy is an attorney in private practice in Tyler, Texas. He is the lead author of the book The LegalGuide to NFA Firearms and Gun Trusts, written with Alan Gassman, Jonathan Blattmachr and severalother attorneys and published in 2016. He authored a chapter on NFA trusts in the book TexasPerspectives on Firearms Law published by the Texas Bar Books in 2015. He is the NFA Editor forInteractive Legal, working with nationally-renowned estate planning attorneys to provide NFA trustforms and supporting knowledge to lawyers throughout the country through their Interactive Legal Suite.

Mr. Healy is Texas State Rifle Association’s General Counsel. He has also served as general counselfor two congressional campaigns, and as National Corporate Counsel for American Mensa. He wasCourse Director for the 2012 and 2013 State Bar Firearms Law Seminars, and spoke at the 2003, 2004,2014, 2015, and 2016 Seminars. He is a mediator for civil, family law, and child protective cases, amember of the American Arbitration Association's Panel of Mediators, and an arbitrator for the BetterBusiness Bureau and AAA. During law school he served as an appellate advocacy instructor, and hepreviously served as a college instructor in business law.

Firearms instruction: Mr. Healy is also a concealed handgun instructor, an NRA-Certified Instructor andTraining Counselor, with certifications in Pistol, Rifle, and Shotgun; Muzzleloading Pistol, Rifle, andShotgun; Metallic Cartridge Reloading and Shotshell Reloading; Home Firearms Safety; and PersonalProtection in the Home. He is a Chief Range Safety Officer. He is a nationally-trained instructor trainerfor Texas 4-H Shooting Sports, and is qualified as a force-on-force instructor.

Speeches and Publications: Mr. Healy testified before a Senate committee as the expert witness for NRAand TSRA regarding House Bill 823, the predecessor to the Motorist Protection Act. He now serves asElection Volunteer Coordinator for the National Rifle Association Institute for Legislative Action,covering Texas Congressional District 1. He has given numerous speeches, continuing legal educationpresentations to judges and lawyers, and televised interviews on firearms matters and other subjects,including an extensive interview that aired on CNN.

Political Activities: Mr. Healy is a life member of the National Rifle Association and SecondAmendment Foundation. He served for eighteen years on the East Texas Friends of NRA Committee.He also served on the Friends of NRA State Fund Committee for North Texas for thirteen years. Mr.Healy represented eight states on the Young Republican National Federation National Committee, andheld numerous other state and local offices, including President of the Tyler Young Republicans. He hasvolunteered on a number of campaigns, served as a delegate to the Republican Party of Texas stateconventions, and served on the RPT Ballot Security Task Force during two elections. He has completeda number of campaign schools including the RNC Western Regional Campaign School and ballotsecurity training. He has also served and as Local Secretary (local President) and certified Proctor forEast Texas Mensa. He served as a state officer for years for the Texas Junior Chamber of Commerce,and as President of the Tyler Jaycees. He served for seven years on the Board of Directors of Azleway,Inc. and its charter school Board of Trustees, including one year as Chairman of the Board.

Firearms Competitions and Outside Activities: Mr. Healy has participated in over 150 firearmscompetitions, including matches organized by the United States Practical Shooting Association(USPSA), International Defensive Pistol Association (IDPA), and Steel Challenge Association. He isalso a private pilot and a Panel Attorney for the Aircraft Owners and Pilots Association.

Mr. Healy’s law practice focuses on business law, civil litigation, family law, representation of propertyowners’ associations, and firearms and aviation matters.

Alan Gassman

< AV® Preeminent™ Peer Review RatedSM by Martindale-Hubbell® Florida Super Lawyers, 2006–present < Florida Trend's 2004 Top 1.8% of the Best Lawyers in Florida < Who's Who in American Law, 1991–1998 < Who's Who in America, 1998 < Who's Who in Science and Industry and Law and Leading Lawyers < Tampa Bay Top Lawyers

Memberships:

< Board of Advisors, Journal of Asset Protection, 1994–1997 < Law & Leading Attorney, 1996–2000 < Fellow, American Bar Association National Association of Estate Planners & Councils < President, Pinellas County Estate Planning Council< 1994 Florida Bar

Education:

< University of Florida, LL.M., Taxation, 1983 < University of Florida, J.D. with honors, 1982< Rollins College, B.A. with distinction, Business Administration and Accounting, 1979

Certifications:

< Board Certified Wills, Trusts and Estates Lawyer by the Florida Board of Legal Specialization < Accredited Estate Planner, National Association of Estate Planners & Councils

Publications:

< Author of more than 200 articles in national publications, symposia and law school text books on physicianplanning, estate tax planning and income tax issues, problems and solutions

< Contributing author, Leimberg Information Services (LISI) < Contributing author, 2005 American Law Institute-American Bar Association Practice Checklist Manual on

Advising Business Clients < Contributing author, National Association of Estate Planners & Councils

Representative Publications:

< "It's All in the Math: Financial Mechanisms, Structures and Questions Under the Accountable CareOrganization Proposed Regulations," ABA Health eSource, April 2011

< Special Edition "Accountable Care Organizations Proposed Regulations Reveal Significant FinancialOpportunities and Structural Requirements," ABA Health eSource, April 2011

< "After Olmstead: Will a Multiple-member LLC Continue to Have Charging Order Protection?" The FloridaBar Journal, December 2010

< "Unconventional Uses of 529 Plans Should Not Be Ignored by Taxpayers and Their Advisors," BNA Tax &Accounting, March 11, 2010

< "Creditor Rights Under Private Annuities and Grantor-Retained Annuity Trusts in Florida," The Florida BarJournal, July/August 2009

< "Recent Adventures in Florida Tenancy by the Entirety — Important Developments," Leimberg InformationSystems, Inc, June 18, 2009

< "Mistakes Doctors Make Managing Their Practices and Investments," Leimberg Information Systems, Inc.,May 20, 2009

< "The Estate Planner's Guide to New Parent F Reorganizations," Estate Planning Magazine, May 2008

Lecturer:

< Co-chairman and presenter, The Florida Bar's annual Physician Representation seminar < Vice chairman and presenter, The Florida Bar's annual Wealth Conservation seminar < BNA national webinars

Table of Contents 1. Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72. Changes to the Paper and Presentation From Prior Versions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73. Professional Considerations: Business, Ethics, and Avoiding Malpractice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84. Summary of Legal Principles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95. National Firearms Association (NFA) Trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

a. The Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10i. Federal Law.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

(1) National Firearms Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10(a) General provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10(b) Definition of“Firearm”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10(c) “Assault Weapons”.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11(d) Machine gun freeze. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12(e) Definition of “Person”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12(f) Requirements for acquiring NFA firearms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13(g) Criminal penalties.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13(h) Death of owner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

(2) Gun Control Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14(a) Definition of “Firearm”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14(b) GCA Provisions applicable to NFA firearms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

(i) Prohibited persons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15(ii) Minors.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16(iii) Transfers to prohibited persons.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

(c) Criminal penalties.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16ii. Texas law.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

(1) “Prohibited weapons” and criminal penalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16(2) Hunting with suppressors.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16(3) Trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

(a) Same person as settlor, trustee, and beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17(b) Spendthrift Trusts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17(c) Same person as settlor and beneficiary.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18(d) Powers of trustees.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

b. Recent Developments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19i. ATF Regulation 41F (Responsible Persons, etc.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

(1) Original Proposal, Docket No. ATF 41P.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19(2) Public Response.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20(3) Final Rule, Docket No. ATF 41F. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21(4) Issue Regarding Transfers from an Estate to a Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22(5) Transition Period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23(6) What was the law like before Regulation 41F?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24(7) Advantages of NFA trusts that existed before Regulation 41F. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

(a) ATF processed applications by trusts more quickly. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25(b) CLEO approval was not required for trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25(c) Fingerprints and photos were not required for trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

(8) When are you required to submit information on “responsible persons”?.. . . . . . . . . . . . . . . . . . . . . 26(9) Impact on gun trusts and other entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

ii. Electronic Filing.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27(1) 7/10/13 Rule. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27(2) Technical Difficulties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28(3) Decreased Wait Times.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28(4) Changes with Regulation 41F. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29(5) Future Improvements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

c. Advantages of NFA Trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29i. Access to NFA firearms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29ii. Protection from criminal prosecution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30iii. Continuity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30iv. 24-Month Exemption.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

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d. Steps involved in acquiring or making NFA firearms (including forming a trust if desired). . . . . . . . . . . . . . . . 30i. Order NFA firearm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30ii. If using a trust, draft and execute it.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31iii. Complete and submit Form 4 (or Form 1).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31iv. Submit two complete copies of Form 4 (or Form 1) with the proper tax.. . . . . . . . . . . . . . . . . . . . . . . . . 31v. Notify the CLEO.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31vi. Wait for ATF to approve the application and return it with the tax stamp.. . . . . . . . . . . . . . . . . . . . . . . . 31vii. Complete Form 4473 and submit to NICS check. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31viii. Take possession of (or “make”) the NFA item.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

e. Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32i. Normal estate planning risks.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32ii. Interstate transportation of NFA firearms... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32iii. Inadvertent transfers to prohibited persons... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32iv. Transfers without Form 4.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32v. Inadvertent violation of firearms laws.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33vi. Changes to the law.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

f. Losing Form 4; Problems with the NFRTR. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33g. Drafting NFA Trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

i. Conduct an adequate consultation with the client... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34ii. Consider the client’s overall situation, and general estate planning needs.. . . . . . . . . . . . . . . . . . . . . . . . 34iii. Thoroughly educate the client (and to the extent possible, the other trustees) regarding the legal principles

and requirements for acquiring, possessing, and transferring NFA firearms.. . . . . . . . . . . . . . . . . . . . . . 35iv. Start with the standard form. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35v. Draft a valid trust.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35vi. Customize the trust for its intended purpose... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36vii. Limit civil liability as much as possible.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36viii. Limit criminal exposure as much as possible.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36ix. Maximize client’s control of the trust and assets.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36x. Determine what assets the trust will hold.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36xi. Maximize flexibility of the trust.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37xii. Provide continuity.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37xiii. Maximize privacy.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37xiv. Include related documents.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

(1) Letter of explanation... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38(2) Removal of Trustee... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38(3) Appointment of Additional (or Successor) Trustee.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38(4) Change of Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38(5) Assignment (to add property to trust). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38(6) Declaration of Trust.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

h. Alternatives to NFA Trusts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38i. Individual ownership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38ii. Corporation/Business entity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

i. Privacy.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40i. Information that must be disclosed to ATF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40ii. Information that must be disclosed to the CLEO.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40iii. Trusts and privacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40iv. Corporations and privacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40v. Practice notes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

j. Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 416. Legal Issues with Inheriting Firearms.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

a. Introduction.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42b. Applicable Gun Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

i. Federal firearms laws.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42(1) Prohibited Persons.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42(2) Age Restrictions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42(3) NICS Check.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43(4) Interstate Transfers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43(5) Mailing and Shipping Firearms... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

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(6) National Firearms Act.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43(7) Firearms Owner’s Protection Act.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43(8) Flying with Firearms.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

ii. Texas firearms laws.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43(1) Prohibited Persons.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43(2) Prohibited Weapons.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43(3) Places Weapons Prohibited... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44(4) “Carrying” a Handgun... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

iii. Firearms laws in other states... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45iv. Choice of Law.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

c. Transferring Firearms to Beneficiaries... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45i. Who Gets the Guns?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45ii. What Estate Planning Method Will Be Used?.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

(1) Last Will and Testament.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46(2) Trust.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47(3) Inter Vivos Transfer.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47(4) Intestate Succession.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

iii. Who Should Be in Charge?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48iv. Drafting Concerns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48v. Safe Storage.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48vi. Special Concerns with NFA Firearms.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48vii. Recommended Steps for the Executor to Take.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

d. Conclusion.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

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1. Introduction

It comes as a surprise to many people that federal lawpermits civilians to own machine guns, suppressors, andsimilar items. That law is called the National FirearmsAct (NFA). In this paper I will refer to items regulated bythe NFA as “NFA firearms.” Texas law also allowsindividuals to own and possess NFA firearms.

The NFA was enacted in 1934. It generally bannedcivilian ownership of machine guns, except those lawfullyregistered. Since then, there appear to be only twoinstances where a legally-owned machine gun was usedin a crime. Both happened in Ohio. One was committedby a law enforcement officer. Crimes committed usingillegally possessed machine guns are also rare.http://www.guncite.com/gun_control_gcfullau.html.

As of 2007 there were approximately 2 million firearmsregistered in the National Firearms Registration andTransfer Record (“NFRTR”), the database of NFAfirearms maintained by ATF. ATF National FirearmsRegistration and Transfer Record (2007), posted athttp://www.justice.gov/oig/reports/ATF/e0706/final.pdf.As of 1995, there were approximately 240,000 registeredmachine guns. Bureau of Justice Statistics, “Guns Usedin Crime, July, 1995, posted at:

http://www.bjs.gov/content/pub/pdf/GUIC.PDF.

Because federal law defines “person” to include trusts,corporations, and other entities, it is lawful to form a trustfor the purpose of owning NFA firearms. This paper willdiscuss the various factors that must be considered indrafting National Firearms Act trusts.

This paper is intended to be used by attorneys draftingNFA trusts for their clients. It is absolutely not intendedto be used by nonlawyers for anything other than generalinformation. I strongly recommend against nonlawyersdrafting their own NFA trusts, because of the immenselegal risks.

This paper will discuss the state and federal lawsregarding machine guns, suppressors and similar items,but only in sufficient detail to allow discussion of NFAtrusts. It will also discuss Texas law regarding trusts, butonly in sufficient detail to allow a practitioner to draft anNFA trust. It is not intended to list each and every statuteand case bearing on these subjects.

Please keep in mind that this paper is based on currentstate and federal law, and on current policy and practices

of ATF. The portions dealing with state law(requirements for trusts and corporations, for instance)are based on current Texas law. If there are changes inthe law, regulations, or ATF practices, then this advicewill change. You must remain informed of the law, if youchoose to draft NFA trusts as a part of your practice.

This paper also addresses firearms issues in probate law.Not surprisingly, a personal representative must complywith all laws, not just the probate laws. There are stateand federal laws governing purchase, use, possession,transportation, shipping, storage, and transfer of firearms,among other things. This paper discusses some of therequirements in the context of an estate.

2. Changes to the Paper and Presentation FromPrior Versions

I have presented this paper at a number of CLE programs,beginning with the SBOT Firearms Law Seminar in FortWorth on September 27, 2013. The versions promulgatedin 2014 and 2015 had only minor revisions.

On January 3, 2016, Attorney General Loretta Lynchsigned BATF Rule 41F. The new regulation becameeffective on July 13, 2016. It significantly changed therequirements for transferring NFA firearms. This requiredsome significant revisions to be made to this paper.

This version includes the following significant revisions,compared to the version presented at the State Bar ofTexas seminar entitled “What Every Texas Lawyer Needsto Know About Firearms Law” on September 18, 2015:

a. Added Section 4, “Summary of Legal Principles." Ifthe reader understands these principles, he or she willunderstand everything else in this paper.

b. Moved “Recent Developments” from Section 13 toSection 6, and thoroughly revised Subsection (a),“ATF Regulation 41F.” 41F is now the law. It madesignificant changes to the application process, whichneed to be discussed near the beginning of the paper.

c. Added Subsection (iv), “Issue Regarding Transfersfrom an Estate to a Beneficiary” to Section 6(a),“ATF Regulation 41F.” This section considerswhether ATF has regulatory authority to requireapplicants to submit information regardingresponsible persons with Form 5.

d. Updated Subsection (b), “Electronic Filing,” inSection 6, “Recent Developments,” to discuss which

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forms ATF accepts electronically now that 41F iseffective.

e. Revised what is now Section 7, "Advantages of NFATrusts,” to account for Regulation 41F.

f. Changed Section 8,"Steps Involved in Acquiring orMaking NFA Firearms," to include the newrequirements to provide information on responsiblepersons pursuant to 41F.

g. Added two more "Related Documents" (to provide toclients along with the actual trust) to Section 11,“Drafting NFA Trusts,” Subsection (n).

h. Added "Info that Must be Disclosed to the CLEO" toSection 13, “Privacy.”

In addition, numerous minor revisions have been madethroughout the paper for clarity, for accuracy, or to addmore detailed information. For instance, after 41Fbecame effective it became necessary to change everyreference to “CLEO signatures.”

The most recent change, appearing first in the 2017version, is to expand the paper to address probate issues.The second section of the paper, “Legal Issues withInheriting Firearms,” was added. Alan Gassmancoauthored this section. Although it is totally inadequaterecognition for his contributions, his bio was added to thebeginning of the paper.

The 2017 version also includes updates on wait times andforms accepted by ATF through the electronic filingsystem.

3. Professional Considerations: Business, Ethics, andAvoiding Malpractice

Before expanding your law practice to include NFAtrusts, you must understand a few facts about the market.

First, you must consider your competition. Experiencedattorneys may charge thousands of dollars forcomprehensive estate planning packages. But most gunowners would rather spend their money on guns, ratherthan legal documents. They will not see the value of yourNFA trust, compared to the other ones advertised on theInternet.

Some people draft their own NFA trusts using standardforms or consumer software such as Quicken orLegalZoom, which is designed to allow nonlawyers to

draft their own simple legal documents. Others get theirforms from office supply stores. Still others start withcopies of their friends’ NFA trusts. Others cobbletogether their own form from documents found on theInternet. There are numerous pitfalls to these approaches.These forms are usually intended to be basic forms, andare not intended to form NFA trusts. They generally donot include specific instructions to the trustees to helpthem comply with the laws regarding guns. They do notinclude advice from an attorney. The drafters often makearbitrary choices about the wording, and the result couldinvalidate or terminate the trust and result in illegalpossession of NFA firearms. You must be prepared toexplain the grave risks of this approach, and to justifyyour fee in other ways. It does not make sense to take achance of a felony conviction to save a little money.

Most attorneys who advertise their NFA trusts charge aflat fee. Many of them focus on spending as little time aspossible on these matters, to keep their fees competitive.They barely confer with the client, provide little or nolegal advice, and generally use the same form with fewmodifications, other than for substituting in the name ofthe settlors, trustees, and beneficiaries.

I have seen NFA trusts advertised by attorneys for lessthan $200.00. According to the State Bar of Texas, theaverage rate for an attorney working full-time in privatepractice in Texas in 2011 was $238.00 per hour.http://www.texasbar.com/AM/Template.cfm?Section=Demographic_and_Economic_Trends&Template=/CM/ContentDisplay.cfm&ContentID=20499. Just how muchhelp should a client expect from an attorney who hasallocated a total of 45 minutes to confer and draft an NFAtrust?

Texas Disciplinary Rule of Professional Conduct 1.04(b)is used to determine whether a given fee is reasonable,based on certain factors. One of those factors is “theamount involved and the results obtained.” In otherwords, the attorney is justified in charging a higher fee ifthere is more at stake. Another way of looking at this isthat, the more significant the consequences to the clientare, the more time the attorney should devote to thematter.

In drafting an NFA trust, the risks to the client include afelony conviction for him or his loved ones, in addition tothe normal estate planning risk of having his propertydistributed in a way that conflicts with his intentions. Putanother way, you may commit malpractice by failing todetermine the client’s level of knowledge about guns andgun laws, or by failing to ask enough questions about the

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client’s overall situation and estate planning needs. If youcharge a lowball fee and focus on volume, you are greatlymagnifying the risks to you and to the client. I believe therisks make it worthwhile for the attorney to devote a littlemore time to the matter, and for the client to be preparedto pay for that time. You may be in serious trouble if youronly defense at a grievance hearing or malpractice trial is,“I only earned $200.00 for this!”

You may also encounter a few clients who need a fullestate planning package, in addition to an NFA trust.Some clients may intend to acquire a large number ofNFA firearms, which could justify custom provisions inthe trust, or forming multiple trusts. Taking the time toask more questions may lead to additional income.

I believe the proper approach is somewhere in the middle.You need to spend an hour or so consulting with theclient and advising him or her how to use the trust. Thisassumes you have a detailed letter that augments your in-person advice. You need to allocate an hour or so to draftthe trust and ancillary documents. I also set aside 30minutes or so to meet with the client at the time the trustis signed.

When setting your fee, you need to consider the timespent drafting your basic NFA trust form. If you havespent ten hours researching and drafting your basic forms,and if you have ten clients who hire you to form NFAtrusts for them, you will need to charge each client forone hour of that time.

If we assume you will spend two to four hours on eachtrust, assuming you charge $250.00 per hour, areasonable fee for an NFA trust would be $500.00 to$1,000.00. If you charge less than that, you are notspending sufficient time to determine the client’s needsand to advise him or her on operating the trust. If youcharge more than that, then you will have very fewclients.

You must also consider the fact that many gun ownerswho consider owning NFA firearms are very wellinformed about gun laws, and the NFA in particular. Youmay meet some lay persons who know more about thisarea of law than you do. If you have any doubt about this,ask one of these people about 18 U.S.C. § 922(r), orabout the (now expired) assault weapons ban. Many gunowners can tell you exactly what makes a gun legal orillegal under these laws. This may be one of the fewinstances when your client will know more about the lawthan you do.

4. Summary of Legal Principles

Most of the information in this paper is derived fromsome key legal principles:

1. Possession of NFA Firearms: The National FirearmsAct (NFA) makes it illegal for any person other thanthe registered owner to possess a Title II firearm(machine gun, silencer or suppressor, short-barreledrifle or shotgun, destructive device, or "any otherweapon"). Violation of this law is a felony punishableby ten years imprisonment plus a fine of up to$250,000.

2. Application and Transfer Tax: It is illegal to make ortransfer an NFA firearm until an application has beensubmitted to ATF, a transfer tax paid ($200.00 for allNFA firearms except for “any other weapon,” whichcosts $5.00), and the application returned by ATFwith a tax stamp. Beginning on July 13, 2016, eachapplication must include additional information on“Responsible Persons,” including a completed“Responsible Person Questionnaire,” plus fingerprintsand photographs of all responsible persons. The chieflocal law enforcement officer (CLEO) must benotified of each application. Applications submittedprior to 7/13/16 did not require the "responsibleperson" information, but individual applicationsrequired a CLEO signature.

3. Trusts are Persons Too: The NFA is a part of the TaxCode (Title 26 of the U.S. Code), which defines"person" to include trusts, corporations, and otherbusiness entities. Therefore trusts and businessentities can legally make or own Title II firearms.

4. Prohibited Persons: It is illegal for any ProhibitedPerson (felons and nine other categories of people) topossess any type of firearm or ammunition. Thisincludes both Title I firearms ("normal" rifles,shotguns, and handguns) and Title II firearms.

5. State Law: State law may also restrict the ability ofindividuals, trusts, or other legal entities from havingownership, possession, and use of firearms, includingTitle II firearms. (For example, in New York andCalifornia a Title II firearm may not be possessedeven if eligible or appropriate under Federal law).

6. Trust Requirements: A trust or business entity thatowns Title II firearms must be legally valid and mustremain in existence during the entire time it has NFAfirearms registered in its name. It must be drafted to

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meet the many requirements that apply to firearmsand NFA items.

Virtually all of the guidelines for drafting NFA trusts arederived from these legal principles. To draft an NFAtrust, start with a valid living trust then modify everyprovision to comply with these principles.

5. National Firearms Association (NFA) Trusts

a. The Law

Ownership of NFA firearms is governed both by state andfederal law. We will first examine federal law, focusingon the law that specifically regulates machine guns,suppressors, and similar items. Then we will examine therelevant parts of the main federal gun control law, theGun Control Act of 1968.

i. Federal Law

(1) National Firearms Act

The National Firearms Act is the federal law thatregulates machine guns, suppressors, and similar items. Itdoes not apply to ordinary guns such as rifles, pistols, andshotguns.

The NFA is contained in 26 U.S.C. Chapter 53. This ispart of Title 26, the Internal Revenue Code, rather thanTitle 18, Crimes and Criminal Procedure. The NFA isbased on Congress’ constitutional authority to imposetaxes. Violations of the NFA are therefore consideredviolations of the tax laws.

The NFA is also known as Title II of the Gun Control Actof 1968. For that reason, NFA firearms are also referredto as “Title II Weapons.”

All manufacturers, importers, and dealers of firearms arerequired to be federal firearms licensees, or FFL’s. Afirearms licensee who deals with NFA firearms isrequired to become a “special occupational taxpayer”(“SOT”). 26 U.S.C. § 5801. Importers are Class 1 SOT’s.Manufacturer/dealers are Class 2 SOT’s. Dealers areClass 3 SOT’s. For this reason, persons who sell NFAfirearms are sometimes referred to as “Class 3 Dealers.”

(a) General provisions

Since 1934 the government has imposed a “transfer tax”on any person wanting to acquire an item regulated by theNFA. 26 U.S.C. § 5811. Along with payment of the tax,the law also requires the applicant to submit an

application to the Bureau of Alcohol, Tobacco, Firearms,and Explosives (hereinafter “ATF”), and to receiveapproval before the transfer.

It is illegal for any person to transfer, receive, or possessan NFA firearm not registered to him. 26 U.S.C. § 5861.

Using or carrying a machine gun, SBR, SBS, DD, orfirearm silencer or muffler during any crime of violenceor drug trafficking carries with it a mandatory minimumsentence of 30 years, in addition to the sentence for theunderlying crime. 18 U.S.C. § 924(c)(1). This could be aconcern to an armed citizen who uses his legally ownedNFA firearm in self-defense.

(b) Definition of“Firearm”

The NFA applies to all “firearms.” The definition of“firearm” under the NFA is both narrower and broaderthan the common meaning of the term. It excludesordinary rifles, pistols, and shotguns, but includes certainparts of NFA firearms that are not actually firearms, suchas sears and baffles. The definition of “firearm” under theNFA includes the following items:

1. Machine guns: “Any weapon which shoots, isdesigned to shoot, or can be readily restored to shoot,automatically more than one shot, without manualreloading, by a single function of the trigger,” pluscertain parts as discussed below. Guns which fire athree round burst are considered machine guns. 26U.S.C. § 5845(b). Gatling guns are not consideredmachine guns. Rev. Rul. 55-528, 1955-2 C.B. 482.

2. Suppressors and silencers: “Any device for silencing,muffling, or diminishing the report of a portablefirearm,” plus parts as discussed below. 18 U.S.C. §921(a)(24).

3. Short barreled rifles: “A rifle having a barrel orbarrels of less than 16 inches in length.” 26 U.S.C. §5845(a).

4. Short barreled shotguns: “A shotgun having a barrelor barrels of less than 18 inches in length.” 26 U.S.C.§ 5845(a).

5. Destructive devices [26 U.S.C. § 5845(f)]:

(a) Bombs, rockets, missiles, mines, etc.: anyexplosive, incendiary, or poison gas (A) bomb,(B) grenade, (C) rocket having a propellentcharge of more than four ounces, (D) missile

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having an explosive or incendiary charge of morethan one-quarter ounce, (E) mine, or (F) similardevice.

(b) Guns with bores over .50 caliber: “Any weaponwhich expels a projectile by the action of anexplosive or other propellant with a bore of morethan one-half inch in diameter (greater than .50caliber), and weapons which may be readilyconverted to fire such large projectiles, except ashotgun or shotgun shell found by the Secretary tobe particularly suitable for sporting purposes.”This exception covers 12 gauge shotguns, forexample, which have a bore size of .73 inches.

(c) Exclusions: The term excludes any device whichis neither designed nor redesigned for use as aweapon; any device originally designed for use asa weapon then redesigned as a signaling,pyrotechnic, line throwing, safety, or similardevice; surplus ordnance sold, loaned, or given bythe Secretary of the Army; or any other devicewhich the Secretary finds is not likely to be usedas a weapon, or is an antique or is a rifle whichthe owner intends to use solely for sportingpurposes.

6. Weapons made from a shotgun: A weapon made froma shotgun if such weapon as modified has an overalllength of less than 26 inches, or a barrel or barrels ofless than 18 inches in length. 26 U.S.C. § 5845(a)(2).

7. Weapons made from a rifle: A weapon made from arifle if such weapon as modified has an overall lengthof less than 26 inches, or a barrel or barrels of lessthan 16 inches in length. 26 U.S.C. § 5845(a)(4).

8. “Any other weapon”: “Any weapon or device capableof being concealed on the person from which a shotcan be discharged through the energy of an explosive,a pistol or revolver having a barrel with a smoothbore designed or redesigned to fire a fixed shotgunshell, weapons with combination shotgun and riflebarrels 12 inches or more, less than 18 inches inlength, from which only a single discharge can bemade from either barrel without manual reloading,and shall include any such weapon which may bereadily restored to fire. Such term shall not include apistol or a revolver having a rifled bore, or rifledbores, or weapons designed, made, or intended to befired from the shoulder and not capable of firing fixedammunition.” 26 U.S.C. § 5845(e). Common AOW’sinclude smooth-bore pistols, pen guns, cane guns,

other disguised firearms, guns that can be fired froma wallet holster or briefcase, and handguns with avertical foregrip.

These definitions appear in the NFA, at 26 U.S.C. §5845, and also in the GCA, at 18 U.S.C. § 921(a).

In addition to the items described above, the NFAdefinition of “firearm” also includes the following partsand combinations of parts:

1. Machine gun receivers: The frame or receiver of amachine gun. 26 U.S.C. § 5845(b).

2. Machine gun parts: Any part or combination of partsdesigned and intended solely and exclusively for usein converting a weapon into a machine gun. 26 U.S.C.§ 5845(b). One example of such an item is an autosear or drop-in auto sear (DIAS), a part which canconvert some semi-automatic guns into a machineguns. Most sears require other parts, or othermodifications to the gun, before it can function as amachine gun.

3. Combinations of parts: Any combination of partsfrom which a machinegun can be assembled if suchparts are in the possession or under the control of aperson. 26 U.S.C. § 5845(b).

4. Suppressor parts: Any combination of parts, designedor redesigned, and intended for use in assembling orfabricating a firearm silencer or firearm muffler, andany part intended only for use in such assembly orfabrication. 18 U.S.C. § 921(a)(24). One example ofsuch an item is a baffle for a suppressor.

5. Destructive device parts: Any combination of partseither designed or intended for use in converting anydevice into a destructive device and from which adestructive device may be readily assembled. 26U.S.C. § 5845(f).

(c) “Assault Weapons”

There is a lot of confusion regarding machine guns, someof it created on purpose. “Semi-automatic” means the gunfires one bullet each time the trigger is pulled. The“automatic” part refers to the fact that the gun reloadsitself, so all the operator has to do to fire another round isto pull the trigger again. The “semi” part refers to the factthat the gun does not fire again without another triggerpull.

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“Fully automatic” or “full auto” means the gun fires morethan one round each time the trigger is pulled. The term“automatic weapons” refers to fully automatic weapons,in other words, machine guns. Fully automatic guns aremachine guns; semi-automatic guns are not.

An “assault rifle” is legitimate term which refers to a fullyautomatic rifle, fired from the shoulder, with anintermediate caliber cartridge and a detachable magazine.The most common examples are the M-16 (or M-4) andthe AK-47.

An assault rifle is distinguished from several other typesof gun. A “battle rifle” such as the Browning AutomaticRifle or M-14 is a fully automatic weapon which fires afull caliber rifle cartridge. This is a disadvantage in fullyautomatic fire because of the increased recoil.

A “submachine gun” such as the MP-5 or Uzi is a smallerfully automatic weapon using a pistol cartridge. Somesubmachine guns can be fired with one hand. Some havefolding or telescoping stocks. Submachine guns range insize from machine pistols (pistol-sized or slightly larger)to rifle-sized, but most are in between, about the size ofa carbine.

The term “machine gun” is used generally to refer to allfully automatic firearms, but it can also to refer tomedium and heavy machine guns. These weaponsgenerally fire rifle cartridges, are often belt fed, arenormally mounted on a bipod, tripod, vehicle, or otherfixed mount, and sometimes served by a crew of morethan one person. Common examples include theBrowming M-2 and the M-60

The term “assault weapon” is a political and legal term.In statutes it is often defined to include semi-automaticguns with cosmetic features such as pistol grips, flashhiders, or bayonet lugs that make them resemble militaryfirearms. Most of these features do little or nothing toincrease the lethality of the firearm. Politicians and othersoften misuse the term and cause the public to confusesemi-automatic guns with fully automatic guns.

In this paper, the term “machine gun” will refer to thelegal definition of the term in the NFA and Texas PenalCode, which is any firearm which fires more than onebullet for one pull of the trigger.

(d) Machine gun freeze

In 1986 Congress passed a law that froze the supply ofmachine guns. 18 U.S.C. § 922(o). Introduced by

William J. Hughes (D-N.J.) as a part of the FirearmOwners’ Protection Act, the freeze is known as theHughes Amendment. As a result of that law, civiliansmay only legally own machine guns registered beforeMay 19, 1986. Machine guns that were not registered asof that date, including those manufactured afterwards,may only be legally owned by governmental entities likethe army and police departments, or by licensed machinegun dealers.

The freeze only applies to machine guns, not to otherNFA firearms. Put another way, civilians can lawfullyown other items regardless of when they weremanufactured or registered, but may lawfully ownmachine guns only if they were manufactured andregistered before May 19, 1986. As long as this law is inplace, the supply of machine guns available for civiliansto own will gradually drop and will never increase. As aresult, the market price for a “transferable” machine gunis many times more than the price for an identical weaponthat is not transferable.

(e) Definition of “Person”

The Internal Revenue Code defines “person” to includeindividuals, trusts, estates, partnerships, associations,companies, and corporations. 26 U.S.C. § 7701(a)(1); seealso 27 CFR § 479.11. This definition is in the“Procedure and Administration” portion of the InternalRevenue Code rather than the NFA.

The NFA makes frequent references to “persons.” Byvirtue of § 7701(a)(1), and sometimes by their ownexplicit language, these provisions also apply to trusts.Here are some specific sections:

1. 26 U.S.C. § 5812 requires the government’spermission to transfer NFA firearms. Section (a)(3)states, “ . . . if such person is an individual, theidentification must include his fingerprints and hisphotograph.” Obviously this statute contemplates“persons” who are not “individuals” seeking transferof NFA firearms into their names.

2. 26 U.S.C. § 5822 prohibits “persons” from making afirearm unless it is registered. This section alsorequires “individuals” to include fingerprints andphotos with their applications.

3. 26 U.S.C. § 5861, makes it illegal for any “person” totransfer, receive, or possess an NFA firearm notregistered to him or her.

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These sections are cited in “NFA and NFA Trusts,” aPowerpoint presentation by ATF attorney William Ryanat the 2012 NRA National Firearms Law Seminar.

The Treasury regulations generally define “trust” as usedin the Internal Revenue Code as “an arrangement createdeither by a will or by an inter vivos declaration wherebytrustees take title to property for the purpose of protectingor conserving it for the beneficiaries under the ordinaryrules applied in chancery or probate courts.” 26 CFR §301.7701-4(a), which defines “Trust.” State law governsthe validity and operation of trusts.

Because these definitions apply to the NFA, the lawallows trusts to own NFA firearms.

(f) Requirements for acquiring NFAfirearms

To acquire an NFA firearm, an applicant must pay thetransfer tax and submit an application. 26 U.S.C. § 5811,5812. There are three different forms which a civilianuses to acquire an NFA firearm:

1. Tax-paid transfers: ATF Form 4, “Application forTax Paid Transfer and Registration of Firearm”, isused for transfers to civilians when there is no reasonwhy the transfer would be exempt from the tax.https://www.atf.gov/file/11346/download.

2. Tax-free transfers: Form 5, “Application for TaxExempt Transfer and Registration of Firearm,” isused for transfers through the probate process (forinstance, inheritance) when no tax is due.https://www.atf.gov/file/11346/download. Form 5 isalso used for transfers to government agencies andtransfers.

3. “Making” an NFA firearm: Form 1, “Application toMake and Register a Firearm,” is used when theapplicant wishes to “make” an NFA firearm.https://www.atf.gov/file/11346/download. In mostcases this does not mean building one from scratch,but rather modifying or assembling a firearm so theend result is an NFA firearm. For instance, swappinga long barrel for a short one on a rifle or shotgun isconsidered “making” an NFA firearm, so Form 1must be completed and approved before this can belegally done.

Dealer-to-dealer transfers are tax-free, and areaccomplished using Form 3, “Application forTax-Exempt Transfer of Firearm and Registration to

S p e c i a l O c c u p a t i o n a l T a x p a y e r . ”https://www.atf.gov/file/11346/download.

For this discussion we will focus primarily on Form 4, butthe same procedures generally apply to Form 1 and Form5 transactions.

All these forms are executed under penalties of perjury.They must be submitted in duplicate, it must identify thespecific firearm to be transferred by serial number. Forthis reason, an applicant cannot submit Form 4 until thedealer actually has the NFA firearm in his or herpossession.

Individual applicants must submit fingerprints and aphoto. 26 U.S.C. § 5812(a). With 41F becomingeffective, trusts and entities must submit the sameinformation for their responsible persons, along with aquestionnaire.27 CFR 479.63(b)(2) [Form 1]; 27 CFR479.85(b)(2) [Form 4].

The applicant must also pay the tax ($5.00 for “any otherweapon,” $200.00 for all other NFA firearms). 26 U.S.C.§ 5811(a).

There are similar requirements for “making” an NFAfirearm. This process requires payment of a $200.00 tax.26 U.S.C. § 5821(a). It also requires submission of asimilar application. 26 U.S.C. § 5822. The form for thisprocess is ATF Form 1, which has similar requirementsto Form 4.

These taxes are fixed, and are not indexed for inflation.

ATF maintains a database of all NFA firearms, called theNational Firearms Registration and Transfer Record.After submission of the form and approval by ATF, theNFA firearm is registered in the database in the name ofthe transferee. The applicant cannot take possession ofthe firearm until the application is approved. 26 U.S.C. §5812(b). The owner must keep the application, andpresent it on request. 26 U.S.C. § 5841(e).

(g) Criminal penalties

Possessing, receiving, or transferring an NFA firearmwithout paying the transfer tax and being the registeredowner is unlawful. 26 U.S.C. § 5861. It is punishable byup to 10 years in prison and a $10,000.00 fine. 26 U.S.C.§ 5871. The firearm is also subject to forfeiture. 26U.S.C. § 5872(a).

Willful evasion of the tax is punishable by a fine of

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$100,000.00 (for individuals) to $500,000.00 (forcorporations and trusts). 26 USC § 7201.

In addition to imprisonment, fines, and forfeiture, afelony conviction also makes it permanently illegal forthe person to possess any firearm, ammunition, orcomponents. 18 U.S.C. § 922(g)(1).

(h) Death of owner

If the owner of an NFA firearm passes away, his heirsmust apply for transfer within a reasonable time (asdefined by ATF). ATF takes the position that possessionof NFA items is a crime, even when it occurs because ofthe death of the registered owner. ATF does allow a“reasonable time” to get the items transferred to the heir.http://www.atf.gov/press/releases/1999/09/090599-openletter-nfa-estate-transfers.html. Of course this statementis in a letter from 1999, and ATF has been known tochange its position without prior notice.

Transfers to heirs are handled using ATF Form 5. Theyare tax-exempt.

(2) Gun Control Act

The Gun Control Act of 1968 is the main federal statuteregulating firearms. It is also known as Title I of thefederal firearms laws. It applies to “normal” guns such aspistols, rifles, and shotguns, and also to most NFAfirearms. The GCA is based on Congress’ authority toregulate interstate commerce, rather than on its authorityto impose taxes.

(a) Definition of “Firearm”

1. The Gun Control Act (“GCA”) applies to all“firearms.” The definition of “firearm” under theGCA is “any weapon . . . which will or is designed toor may readily be converted to expel a projectile bythe action of an explosive.” 18 U.S.C. § 921(a)(3)(A).

The GCA does exclude “antique firearms.” This refers to“any firearm not designed or redesigned for using rim fireor conventional center fire ignition with fixedammunition and manufactured in or before 1898(including any matchlock, flintlock, percussion cap, orsimilar type of ignition system or replica thereof, whetheractually manufactured before or after the year 1898) andalso any firearm using fixed ammunition manufactured inor before 1898, for which ammunition is no longermanufactured in the United States and is not readilyavailable in the ordinary channels of commercial trade.”18 U.S.C. § 921(A)(16). The NFA also excludes “antiquefirearms” from its definition of “firearm.” 26 U.S.C. §5845(g).

Most of the items defined by the NFA as “firearms” arealso defined by the GCA as “firearms.” Most NFAfirearms are also considered “firearms” under state law.Therefore a person possessing an NFA firearm mustgenerally comply with the restrictions on the special typesof firearms under the NFA, the federal laws governing allfirearms under the GCA, and state laws governingfirearms.

There is a narrow category of items that are considered“firearms” under the NFA but not the GCA. Here is amatrix showing how these two laws overlap:

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Gun Control Act

Firearm Not a firearm

Nat

iona

l F

irea

rms

Act

Firearm “Firearm” under both laws:* Machine guns* Short barreled rifles (barrel < 16"or

overall < 26")* Short barreled shotguns (barrel < 18" or

overall < 26")* Destructive devices that are actual

firearms* Weapons made from a shotgun or rifle* "Any other weapon"* Guns that can be readily converted to

machine guns

“Firearm” only under NFA:* Suppressors and silencers* Suppressor parts* Machine gun parts and receivers* Destructive devices that are not actual

firearms (bombs, rockets, missiles,mines, etc.)

Not afirearm

“Firearm” only under GCA:* Normal pistols* Normal rifles* Normal shotguns

Not “firearms” under either law:* Antique firearms* Airguns* any device (other than a machinegun or

destructive device) designed as a weaponbut which the Secretary finds is primarilya collector's item and is not likely to beused as a weapon.

(b) GCA Provisions applicable to NFAfirearms

The Gun Control Act applies to items that are definedas “firearms” under the GCA. That includes machineguns, short-barreled rifles and shotguns, somedestructive devices (for instance, rifles with a bore over½" in diameter), and “any other weapon.” It does notinclude suppressors, suppressor parts, destructivedevices that are not guns (for instance, hand grenades),and internal parts like drop-in auto sears that can beused to convert a firearm to fully automatic. In plainEnglish, the GCA applies to “guns” but generally not toparts.

(i) Prohibited persons

Federal law makes it illegal for any of these persons topossess firearms or ammunition [numbers aresubsections of 18 U.S.C. § 922(g)]:

(1) Persons who have been convicted of a crimepunishable by imprisonment for a term exceedingone year;

(2) Fugitives from justice;

(3) Unlawful users of or persons addicted to anycontrolled substance;

(4) Persons who have been adjudicated as a mentaldefective or who have been committed to a mentalinstitution (unless their rights were restored);

(5) Illegal aliens and persons with nonimmigrant visas;

(6) Persons with dishonorable discharges from the U.S.Armed Forces;

(7) Persons who have renounced their U.S. citizenship;

(8) Persons subject to certain domestic court orders(protective orders and some injunctions); and

(9) Persons who have been convicted of a misdemeanorcrime of domestic violence (if represented bycounsel and tried by a jury, or knowingly andintelligently waived those rights).

It is a crime for a person under indictment for a crimepunishable for confinement for more than one year toship, transport, or receive a firearm. 18 U.S.C. §922(n).

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A person is not considered “convicted” if the convictionwas expunged or set aside, if the person was pardoned,or had his civil rights restored, unless same providedthat the person may not possess firearms. 18 U.S.C. §921 (a)(33)(A).

(ii) Minors

Persons under 18 years of age may not lawfully possesshandguns or ammunition that is only usable inhandguns. 18 U.S.C. § 922(x). There are certainexceptions involving specific circumstances. Gundealers may not sell handgun ammunition to personsunder 21. 18 U.S.C. § 922(b)(1). To avoid problems,persons under 21 should not generally be appointed astrustees of NFA trusts.

(iii) Transfers to prohibitedpersons

It is unlawful to sell or otherwise dispose of any firearmor ammunition to any person knowing or havingreasonable cause to believe that such person is aprohibited person. 18 U.S.C. § 922(d).

(c) Criminal penalties

Violation of the GCA carries a penalty of up to 10 yearsin prison, subject to the federal sentencing guidelines.18 USC § 924(a)(2). Fines can go as high as$250,000.00. 18 USC § 3571.

ii. Texas law

There are several areas of Texas law that apply to thepossession, ownership, and use of NFA firearms. Statelaw also governs the creation, operation, and legaleffect of trusts.

(1) “Prohibited weapons” and criminalpenalties

The state law governing this type of firearm iscontained in Texas Penal Code § 46.05, “ProhibitedWeapons.” Subsection (a) makes it illegal to possessten different types of weapons. These include explosiveweapons, machine guns, short-barrel firearms, andsilencers, which are all regulated by the NFA.Possessing any of these four items is a third-degreefelony, punishable by confinement for two to ten yearsand a fine of up to $10,000.00. Tex Pen. C. § 46.05(e),§ 12.34.

Until 2015, Texas Penal Code § 46.05(c) stated, “It is

a defense to prosecution under this section that theactor's possession was pursuant to registration pursuantto the National Firearms Act, as amended.” This maderegistration an affirmative defense, which had to beproven by the accused. In 2015 the law was amended tosay that possession of an explosive weapon, machinegun, short-barrel firearm, or silencer is illegal unless itis registered in the NFRTR or classified by theDepartment of Justice as a curio or relic. Texas PenalCode § 46.05(a). Therefore persons who lawfullypurchase their NFA firearms by paying the transfer taxand obtaining approval of Form 4 should not bearrested and prosecuted for possessing a prohibitedweapon.

Section 46.05 also deems other items, not regulated bythe NFA, to be “prohibited weapons.” Possession of“knuckles” is only a Class A Misdemeanor. Possessionof a “tire deflation device” is a state jail felony.

The definitions in the state law are different from thosein the NFA. See Texas Penal Code § 46.01 and 26U.S.C. § 5845. The Texas definition of “explosiveweapon” is similar to part of the definition of“destructive device” in the NFA, but the state definitiondoes not include firearms that have a bore over ½" indiameter but do not fire explosive rounds. The statedefinitions only include the actual firearms (machinegun, SBR, SBS, and silencer), but not the parts(receiver, sear, baffles, etc.). The state law also does notdeclare “any other weapon” to be a “prohibitedweapon.” To be a “silencer” under the NFA, the itemmust be portable, but that is not a part of the definitionof “firearm silencer” under Texas law.

A citizen wishing to legally own NFA firearms cancomply with the requirements of the NFA, and knowthat he or she is thereby complying with Texas law. Aperson being prosecuted for violating the NFA or Texaslaw (or his attorney) should carefully analyze thedefinitions to see if they apply to the particularcircumstances.

(2) Hunting with suppressors

On March 29, 2012, the Texas Parks and WildlifeCommission voted unanimously to allow the use ofsuppressors while hunting game animals (mule deer,white tail deer, and antelope). 31 Texas AdministrativeCode § 65.11(1)(a). Suppressors were previously legalfor use in other shooting activities, and in huntingnuisance animals (such as feral hogs, coyotes, andexotic game) but not for game animals.

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The benefits of suppressors include increased safetydue to protection from hearing damage, reduced noisepollution, and increased accuracy due to reduced recoiland muzzle blast. I expect that this will significantlyincrease the number of lawfully owned suppressors inthe state.

(3) Trusts

Trusts are commonly used in the estate planningprocess. A trust is a legal arrangement that separates theright to control assets from the right to receive thebenefits from those assets. In other words, one personcontrols the assets for the benefit of another person.The obvious example is a child who inherits significantassets - normally a responsible adult will control theassets for the child’s benefit.

Trusts can be revocable (able to be cancelled oramended) or irrevocable (set in stone once formed).Making a trust revocable or irrevocable has legal and/ortax consequences.

A trust has three main categories of persons involvedwith it. The settlor (or donor) is the person whotransfers the property to the trust. The trustee is theperson who controls the property in the trust, for thebenefit of the beneficiary (the trustee also has the rightto keep possession of the trust property, which is a sidebenefit of an NFA trust). The beneficiary is the personwho is ultimately entitled to receive the benefits fromthe property. A trust may have more than one donor,beneficiary, and trustee.

Texas Property Code § 112.008(c) allows a settlor toserve as trustee, but there can be serious consequencesof that decision. The settlor can also be a beneficiary.

An NFA Trust is generally a revocable living trust. Thismeans the settlor retains the power to modify ordissolve the trust (“revocable”), that the settlor is alivewhen he or she forms the trust (“living”), rather thanarranging for a trust to be formed upon death(“testamentary”). NFA trusts generally have the samebasic characteristics as ordinary living trusts. Thispaper focuses on the characteristics that are relevant tofirearms.

(a) Same person as settlor, trustee, andbeneficiary

The biggest risk to the client, and to the lawyer, is thatthe lawyer could draft an invalid trust. As a result, the

trustees could possess NFA firearms without legalauthority to do so. The easiest way to draft an invalidtrust is to appoint one person as the sole trustee and thesole beneficiary. This seems like a good idea, whichwould allow the client to obtain all the benefits of anNFA trust without giving up any control. Unfortunatelythis results in merger of the right to control the propertyand the right to receive the benefits, which violates thewhole idea of a trust.

Texas Property Code § 112.008(b) allows the settlor tobe a beneficiary. Section 112.008(c) allows the settlorto be a trustee. But as we will see, one person cannot bethe sole trustee and the sole beneficiary.

Texas Property Code § 112.034 (part of the TexasTrust Code) sets out the doctrine of merger: "If a settlortransfers both the legal title and all equitable interests inproperty to the same person or retains both the legaltitle and all equitable interests in property in himself asboth the sole trustee and the sole beneficiary, a trust isnot created and the transferee holds the property as hisown.” “Legal title” refers to the interest held by thetrustee, primarily control of the assets. “Equitable title”refers to the interest held by the beneficiary, primarilythe right to receive the benefits. “Merger” refers to thefact that a single person holds both the right to controland the right to receive the benefits of the trustproperty. This is contrary to the whole idea of a trust,which is to separate those two interests.

Section 402(a)(5) of the Uniform Trust Code (whichhas been adopted by 23 states) sets forth this sameprinciple.

In the case of NFA trusts, this principle also means thatthe individual has possession of NFA firearms whichare not registered in his name. Because the trust isinvalid, the individual faces possible criminalprosecution.

To avoid merger problems, a trust must also have atleast one beneficiary who is not a settlor.

(b) Spendthrift Trusts

A spendthrift trust prohibits the interest of a beneficiaryin the income or principal of a trust from beingtransferred to a third party, whether voluntarily orinvoluntarily, before it is actually paid or delivered tothe beneficiary. Texas Property Code § 112.035(a). Thetrust does not even have to set this out explicitly - it isenough to use the phrase “spendthrift trust.”

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Section 541(c)(2) of the Bankruptcy Code [11 U.S.C.§ 541(c)(2)] excludes property held by spendthrifttrusts from the bankruptcy estate, so in thiscircumstance federal law incorporates the protections ofstate law. Spendthrift provisions are common, intendedto protect the assets from claims of the beneficiary'screditors. By taking away any right to assign futuredistributions to third parties, the trust protectsirresponsible beneficiaries from their own baddecisions.

NFA trusts should normally be created as spendthrifttrusts. In addition to the normal protections thisprovides, it also protects the NFA firearms from beingtransferred in conflict with the settlor’s desires.However, the attorney must advise the client that if heincludes a spendthrift clause, he will need the consentof the other beneficiaries to terminate the trust. Fewellv. Republic Nat'l Bank, 513 S.W.2d 596, 598(Tex.Civ.App.--Eastland 1974, writ ref'd n.r.e.).

(c) Same person as settlor and beneficiary

Spendthrift trusts do have some limitations. The “self-settlor rule” provides that when a settlor is also abeneficiary, a spendthrift provision does not preventcreditors from reaching the settlor’s interest in the trustestate. Texas Property Code §112.035(d); see alsoDaniels v. Pecan Valley Ranch, Inc., 831 S.W.2d 372,378 (Tex.App.--San Antonio 1992, writ denied). Thismeans that a settlor who also makes himself abeneficiary leaves the trust property vulnerable to theclaims of his creditors.

The Fifth Circuit has reached a similar conclusion. Inthe Matter of Shurley, 115 F.3d 333, 337 (5th Cir.1997) held that the property contributed to a trust by asettlor who is also a beneficiary is not protected fromcreditors’ claims. The Court explained: “The rationalefor this ‘self-settlor’ rule is obvious enough: a debtorshould not be able to escape claims of his creditors byhimself setting up a spendthrift trust and naminghimself as beneficiary. Such a maneuver allows thedebtor, in the words of appellees, to ‘have his cake andeat it too.’”

In most NFA trusts there are only one or two settlors (asingle person or a married couple). That means in mostcases, a creditor would be able to reach the entire trustestate. The clients need to understand this beforeforming their trust.

These limits are especially important in trusts that own

NFA firearms. If the trust is invalid under state law,then the person who possesses the NFA firearm is notthe actual owner, and has no authority to possess it onbehalf of the (nonexistent) trust. If ATF does notrecognize the validity of the trust, it may disapprove thetransfer or find the persons named as trustees areviolating NFA by possessing NFA firearms illegally.

Because of the vital importance of meeting these legalrequirements, nonlawyers put themselves in grave legaldanger when they draft their own trusts, find forms onthe Internet, or use general living trust forms notintended to own NFA firearms.

Trusts must generally be in writing. Texas PropertyCode § 112.004. NFA trusts always have to be inwriting, because the applicant must provide a copy ofthe trust to ATF (not just a summary or declaration ofthe trust). In addition, the trustees need guidance tocomply with the law, so it protects everyone involved tohave the rules set forth in writing.

The trust should also require each trustee to sign it,representing that they have read it and agree to complywith its terms. Trustees who exercise powers or performduties under a trust are presumed to have accepted theterms of the trust, but their signature on the trust or aseparate written acceptance is “conclusive evidence” ofacceptance. Texas Property Code § 112.009(a).

At some point a trust must terminate. If there are stillassets in the trust, they must be distributed somehow.One common arrangement is for the property to betransferred directly to the beneficiary, who may do withit as he or she wishes. Another common arrangement isfor the assets to be sold, then the proceeds distributedto the beneficiary.

(d) Powers of trustees

The “broad form” list of trustees’ powers include anumber of provisions that could be useful at somepoint. These powers are similar to the powers held bythe board of directors of a corporation. They aredescribed in Texas Property Code Chapter 113.

The client will probably want to retain as much poweras possible over the trust and its property. It isunderstandable that a client who forms an NFA trustand buys the trust property with his own money wouldwant to be able to override the decisions of any othertrustees.

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Texas Property Code § 113.085(a) governs “Exerciseof powers by multiple trustees.” Until 2005, therelevant part of this section read: “Except as otherwiseprovided by the trust instrument or by court order . . . apower vested in three or more trustees may be exercisedby a majority of the trustees.” In 2005 this languagewas amended to read, “Cotrustees that are unable toreach a unanimous decision may act by majoritydecision.” This was interpreted to mean that cotrusteesmust first try to reach unanimous agreement, but ifunsuccessful, the majority rules. In 2007 this languagewas amended to read, “Cotrustees may act by majoritydecision.”

I was unable to find any Texas cases consideringwhether trustees can have unequal powers. This is anopen question.

You may consider including a provisions stating that inthe event of a disagreement between the settlor/trusteeand the other trustees, the decision of the settlor/trusteeis final. Obviously this is not a typical provision, and itmay run afoul of § 113.085(a). Hopefully a court wouldrule this provision unenforceable, instead ofinvalidating the entire trust, but it is up to you todetermine whether to take a chance. You might increaseyour odds by incorporating a provision allowing theother trustees to override the decision of thesettlor/trustee by a supermajority vote, to make suretheir trustee positions are legitimate. This may helpcounter an argument that the other trustees have no realpower and are therefore not really trustees, whichwould make the settlor/trustee the sole trustee.

In the alternative, you could include a provisionrequiring a supermajority, or even unanimous consentfor certain decisions such as selling or transferring NFAfirearms.

b. Recent Developments

In general, the laws and regulations governing NFAfirearms rarely change. In the three years between July2013 and July 2016, there have been two majorchanges. One is the new regulation which was proposedin 2013 and became effective on July 13, 2016. Theother is ATF’s electronic filing system which wasannounced on July 10, 2013 and which was taken down(the portions which were usable by nondealers, anyway)on April 5, 2014.

The section discussing Regulation 41F is essentiallyexcerpted from the forthcoming Second Edition of the

book The Legal Guide to NFA Firearms and GunTrusts. I appreciate the other authors for theircontributions, and for their permission to use thisinformation in this paper.

i. ATF Regulation 41F (ResponsiblePersons, etc.)

On August 29, 2013, President Obama announced thathe would introduce a federal rule requiring "responsiblepersons" of firearms trusts and businesses to submitphotos and fingerprints, and undergo backgroundchecks. ATF published the proposed regulation in theFederal Register on September 9, 2013. “BackgroundChecks for Responsible Persons of a Corporation,Trust, or Other Legal Entity with Respect to Making orTransferring a Firearm” (Docket No. ATF 41P), 78Fed. Reg. 55014 (Sept. 9, 2013). Because of the docketnumber, the proposed rule was commonly referred to as“41P.”

On January 4, 2016, the Attorney General signed a finalrule, which was significantly different from the originalproposal. Final Rule 41F (AG Order No. 3608-2016) isposted here:

https://www.federalregister.gov/articles/2016/01/15/2016-00192/machineguns-destructive-devices-and-certain-other-firearms-background-checks-for-responsible-persons#h-302.

The proposed rule and the final rule are discussed indetail below.

(1) Original Proposal, Docket No. ATF41P

The regulation as originally proposed would have donethe following:

1. Responsible Persons: Required all “responsiblepersons” of trusts and business entities seeking toown NFA firearms to submit fingerprints andphotographs to ATF, and to undergo a backgroundcheck. In general, “responsible persons” includestrustees and corporate officers, directors, andmanagers, and anyone else having the right to makemajor decisions or possess NFA firearms.

2. CLEO Signature: Required each application from atrust or business entity to have the signature of thechief local law enforcement officer (“CLEO”)having jurisdiction over the area. In the past, this

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requirement only applied to individuals wishing tomake or receive an NFA firearm, not to trusts andbusiness entities. Because CLEO’s have never beenunder any legal duty to sign these forms, this wouldhave effectively given each CLEO the power to banNFA firearms in his or her jurisdiction.

3. Estates: Allowed executors and administrators ofestates to lawfully possess NFA firearms owned bya deceased person for a “reasonable time,” while theestate is being administered.

Here is some background information on the originalproposal:

1. "Admin. Announces New Gun Control Measures,Targets Military Surplus Imports," posted at:

http://www.foxnews.com/politics/2013/08/29/obama-announces-new-gun-control-measures-targets-military-surplus-imports/ (accessed 8/29/13)

2. "White House eyes 'gun trust' loophole," posted at: http://thehill.com/blogs/regwatch/pending-regs/31

8133-white-house-reviewing-draft-gun-control-rule

3. White House press release:

http://www.whitehouse.gov/the-press-office/2013/08/29/fact-sheet-new-executive-actions-reduce-gun-violence

4. Official description of the proposed rule:

http://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201210&RIN=1140-AA43

5. The "Docket Folder Summary" for this rule (withcomments and other information):

http://www.regulations.gov/#!docketDetail;D=ATF-2013-0001

6. Notice of Proposed Rulemaking:

https://www.atf.gov/sites/default/files/assets/inside-atf/2013/082913-wash-machine-guns-destructive-devices-and-certain-other-firearms.pdf

As discussed below, the rule that was eventuallyadopted is significantly different from the originalproposal.

(2) Public Response

The rule was subject to a 90-day comment period,which ended December 9, 2013. At the end of thatperiod, ATF had received 9,479 comments, which wereoverwhelmingly against the proposal. The law requiresATF to review and respond to each and every commentbefore finalizing such a rule, which caused some majorproblems.

This proposed regulation was supposedly the result ofa petition filed in 2009 by the National Firearms ActTrade and Collectors Association (NFATCA),requesting certain changes to the application process.After 41P was published, the Association opposed it,stating in its official comment to the proposal, “ . . . theproposed rule bears little resemblance either to theNFATCA’s original proposal, or to the changes that theNFATCA discussed with ATF and that were publishedin ATF’s Unified Agenda repeatedly over the last fewyears.” Letter from John C. Frazier to ATF (officialcomments of NFATCA), 12/9/13. NFATCA alsosubmitted a legal memorandum authored by StephenHalbrook, arguing that ATF does not have legalauthority to adopt 41P.

The White House press release said, " . . . felons,domestic abusers, and others prohibited from havingguns can easily evade the required background checkand gain access to machine guns or other particularlydangerous weapons by registering the weapon to a trustor corporation." This statement is misleading becauseit ignores several significant facts. First, merepossession of a firearm or ammunition by a prohibitedperson is a felony. Second, the law still requires theperson accepting delivery of the item on behalf of atrust or business entity to complete a Form 4473 andsubmit to a background check through NICS (theNational Instant Check System). Third, the persontaking delivery of the item could be committing twofederal felonies, one by misrepresenting the identity ofthe person who would receive the item (a “strawpurchase”), and another by giving a firearm to aprohibited person.

The authors of “The Legal Guide to NFA Firearms andGun Trusts were unable to locate a single reported casewhere a person was prosecuted for using a trust orbusiness entity to obtain an NFA firearm. In the Notice,ATF identified three occurrences where a prohibitedperson was involved with a trust or business attemptingto obtain an NFA firearm. In none of them did thetransfer occur, and there was no allegation that a crime

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was actually committed in any instance.

The biggest problem with the proposed regulationrelated to the requirement for the chief local lawenforcement officer (“CLEO”) to sign each application,certifying his or her belief that the individual inquestion will not be in violation of any state or locallaws and that, in their opinion, the individual will notuse the firearm for anything other than lawful purposes.In the past, ATF required a CLEO signature on eachapplication for an individual to own an NFA firearm.This requirement did not apply to trusts or businessentities. This is one of the major reasons why NFAtrusts became popular - in jurisdictions where CLEO’srefused to sign these applications, the only lawful wayto own an NFA firearm was through a trust or businessentity.

At the time the National Firearms Act was enacted in1934, the CLEO signature requirement made sense.Before the advent of computers and the Internet, stateand local law enforcement officers were in a muchbetter position to evaluate each individual applicationthan the federal government. With no centralizedrecords of criminal histories, the local sheriff wasprobably in the best position to determine whether anapplicant had a history that would render him or herunsuitable to own NFA firearms. However, with theadvent of the Internet, and specifically the NationalDatabase for Background Checks, the federalgovernment can now accurately and confidentlyperform a background check with the click of a mouse.

The proposed regulation would have extended theCLEO signature requirement to all applications. Ineffect, it would have allowed each local officials toprohibit persons in that jurisdiction from owning NFAfirearms, with or without good cause. This would applythroughout the country, even when the state legislaturedeemed it legal for its citizens to own NFA firearms.

The problem with extending the CLEO signaturerequirement to all NFA applications is that there was nolegal requirement for CLEO’s to sign them, even forlaw-abiding persons. Some states passed “shall sign”legislation, requiring their officials to sign theapplications unless there was a valid reason not to doso, such as a criminal history. But throughout most ofthe country, a CLEO was free to refuse to sign some orall individual NFA applications. Local citizens had norecourse other than to form a trust or business entityand register the NFA firearm in its name. Some CLEOsrefused to sign for fear that they could be held liable,

should the NFA firearm be used for illegal purposes.Some refused to sign for fear of political backlash.Undoubtedly, some refused to sign because theybelieved civilians should not be allowed to ownmachine guns, suppressors, or similar items. If youagree, then you probably support any rule or law thatreduces ownership of guns. It is beyond dispute that anationwide CLEO signature requirement would resultin vastly different treatment of people in different partsof the country, and even different parts of the state,based solely on the attitudes of their local lawenforcement officers. This violates our belief that thelaw should treat people the same. It also violates theprinciple that government should be of laws, rather thanof men. Local officials are entitled to their personalbeliefs, but in a republic personal opinions should nothave the force of law. Fortunately, the final ruleremoves this discretion, treating people the same in alljurisdictions where civilians are allowed to own NFAfirearms.

There is a strong argument to be made that CLEOs hadno legitimate reason to refuse to sign NFA applications.As noted above, legally owned NFA firearms arealmost never used to commit crimes. Also keep in mindthat this issue only arises in states where the legislaturehas decided that civilians may legally own NFAfirearms (in states where it is not legal, ATF will denythe application on that basis). In addition, there is onlyone widely reported case where a CLEO was sued fora death allegedly resulting from his signing an NFAapplication. Searcy v. City of Dayton, 38 F.3d 282,284-85, 30 Fed. R. Serv. 3d 997, 1994 FED App.0361P (6th Cir. 1994). In that case the Court ofAppeals held that summary judgment against theplaintiff was proper because there was no proof that thedeath was caused by the CLEO’s decision to sign theapplication. On the merits, there is little or no evidenceof bad consequences resulting from CLEO’s signingapplications for persons to make or acquire NFAfirearms.

Fortunately, ATF deleted the universal CLEO signaturerequirement from the final version of the regulation.The final rule replaced it with a CLEO notificationrequirement, discussed below.

(3) Final Rule, Docket No. ATF 41F

The initial Notice stated that the rule was intended to befinalized and become effective in June 2014. ATFsubsequently moved that date back to January 2015.There were several other delays. In 2015 ATF changed

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the date specified for "Final Action" to "1/00/2016."Then on January 4, 2016, without any further warning,Attorney General Loretta Lynch signed the final rule.

The final rule was renamed Docket No. ATF 41F. ATFpublished the rule in the Federal Register on January15, 2016, which means it became effective on July 13,2016.

https://www.federalregister.gov/articles/2016/01/15/2016-00192/machineguns-destructive-devices-and-certain-other-firearms-background-checks-for-responsible-persons#h-302

The new rule provides as follows:

1. Responsible Persons: All “responsible persons” oftrusts and business entities seeking to own NFAfirearms are required to submit a completed“Responsible Person Questionnaire” (ATF Form5320.23) submit fingerprints and photographs toATF, and to undergo a background check. Thisapplies to Form 1 applications to make an NFAfirearm. 27 CFR 479.63(b)(2). It also applies toForm 4 applications to transfer an NFA firearm. 27CFR 479.85(b)(2). In general, the definition of“responsible person” includes anyone having theright to make significant decisions regarding thetrust or business entity, or the right to possess anyNFA firearms owned by the trust or entity. 27 CFR479.11. For most trusts, this will apply to thetrustees. For most business entities, this will applyto officers, directors, managers, and possibly someemployees. This requirement increases the burdenof preparing NFA applications, and compromisesthe privacy of responsible persons.

2. CLEO Notification: Requires each transferee andeach “responsible person” to notify the chief locallaw enforcement officer (“CLEO”) havingjurisdiction over the area of the filing of theapplication. This applies to Form 1 applications tomake an NFA firearm. 27 CFR 479.62(c), It alsoapplies to Form 4 applications to transfer an NFAfirearm. 27 CFR 479.84(c). The rule requires onlynotification to the CLEO, rather than having theCLEO sign and make the certifications printed onthe prior version of the form. The new “CLEOnotification” requirement replaces the old “CLEOsignature” requirement which applied to individualapplications. As a result, individuals will now beallowed to own NFA firearms throughout stateswhere it is legal, with or without the approval of

local officials. The elimination of the CLEOsignature requirement is a significant improvementto the law. The disadvantages of the new CLEOnotification requirement are that it slightly increasesthe burden of submitting an application, and itsignificantly compromises privacy of the applicantand responsible persons. Because these applicationsare considered tax documents, which are generallyconfidential by law, this provision is likely to bechallenged in court.

3. Estates: Allows executors and administrators ofestates to lawfully possess NFA firearms whichwere registered to a deceased person “during theterm of probate,” without it being considered a“transfer.” 27 CFR 479.90a. This is an improvementwhich formalizes ATF’s preexisting policy forestates.

4. Exemption: Creates an exemption from therequirement to provide information regardingresponsible persons (fingerprints, photos, and theResponsible Person Questionnaire) if the applicanthas had an application to make or receive an NFAfirearm approved in the last 24 months, and there isno change to the information previously provided.Like the other changes, this applies to Form 1 andForm 4 applications. 27 CFR 479.63(c); 27 CFR479.85(c). This 24-month exemption is animprovement that should streamline approval ofexempted applications, and speed up processing ofall applications by reducing volume.

ATF has posted a page with explanations, links to thenew forms (Form 1, Form 4, Form 5, and Form 23),here:

https://www.atf.gov/rules-and-regulations/final-rule-41f-background-checks-responsible-persons-effective-july-13#Who

ATF posted “Frequently Asked Questions” here:

https://www.atf.gov/resource-center/docs/general41fquestionsandanswersupdated-6-28-16pdf/download

ATF has also established an email address for questionsregarding 41F: 41F@atf.gov.

(4) Issue Regarding Transfers from anEstate to a Beneficiary

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New Regulation 41F established a rule allowingpersonal representatives (executors and administrators)to possess NFA firearms registered to the decedent,during the term of probate. This replaced ATF’sinformal policy of allowing personal representatives topossess those items “for a reasonable time.”

There are two ways a personal representative cantransfer a decedent’s NFA firearms. If the transferee isa beneficiary, then the personal representative transfersthe NFA firearm to the beneficiary using Form 5. ATFdoes not collect the transfer tax for these transfers. Thereason is that they consider this a change of ownershipby operation of law, rather than a voluntary transfer.

If the transferee is not a beneficiary, then ATFconsiders this to be a voluntary transfer, and thepersonal representative applies for permission to makethe transfer using Form 4. In this case, the transfer taxmust be paid, as in other Form 4 transfers.

There is a possible issue regarding Form 5 transfersfrom an estate to a beneficiary. ATF published a newForm 5 in May, 2015, a couple of months before 41Fbecame effective. The new Form 5 requires informationon Responsible Persons. This includes a completedResponsible Person Questionnaire, fingerprints, andphotographs.

It appears that the actual rules do not require thatinformation to be submitted with Form 5.

In contrast, the new rules clearly require ResponsiblePerson information to be provided with Form 1,“Application to Make and Register a Firearm.” 27 CFR§ Sec. 479.62(b)(2) requires the name, address, andidentifying info for each RP to be provided on Form 1.Section 479.63(b)(2)(ii) requires the ResponsiblePerson Questionnaire to be submitted with Form 1.Section 479.63 (b)(2)(iii) requires the RP's photos.Section 479.63 (b)(2)(iv) requires the RP's fingerprints.

The new rules also clearly require Responsible Personinformation to be provided with Form 4, “Applicationfor Tax Paid Transfer and Registration of Firearm.”Section 479.85(b)(2)(ii) requires the RP Questionnaireto be submitted with Form 4. Section 479.85(b)(2)(iii)requires the RP's photos. Section 479.85(b)(2)(iv)requires the RP's fingerprints.

The new rule for estates requires this information fortransfers to nonbeneficiaries. Section 479.90a(b)requires the executor to file Form 4 in accordance with

479.84. Section 479.84(a) requires all RP informationto be provided with every Form 4 application.

The rules do not appear to require this information to beprovided for Form 5 transfers. Section 479.90a coversEstates. Subsection 479.90a(a) covers transfers tononbeneficiaries. That subsection requires the personalrepresentative to file Form 5 “in accordance with §479.90.” Section 479.90 deals with transfers to “Certaingovernmental entities” (which are also accomplishedusing Form 5 because no tax is collected). Section479.90 does not mention "responsible persons" anddoes not require submission of the Responsible PersonQuestionnaire, fingerprints, or photographs.

Nowhere in the regulations is there an explicitrequirement to submit the Responsible PersonQuestionnaire, fingerprints, or photographs with Form5. The fact that the rules explicitly require thatinformation to be provided with Form 1 and Form 4 isevidence that this information is not required to besubmitted with Form 5. In other words, ATF rewrotethe rules to specifically require information onResponsible Persons with Form 1 and Form 4. If theywanted to require it for Form 5, all they had to do is sayso in the rule.

How will this issue be resolved? ATF will undoubtedlyrequire submission of the current version of Form 5,including all the required information. We can expectthem to reject any application submitted using the oldForm 5, and to reject any Form 5 application whichomits the Responsible Person Questionnaire, fingerprintcards, or photos. Therefore this issue will only beresolved if someone files a lawsuit or administrativeappeal challenging ATF’s authority to require thisinformation with Form 5 applications. ATF also has theoption of publishing another Notice of ProposedRulemaking to add these requirements for Form 5applications. Of course that would require ATF toprovide another comment period, and to comply withthe other rulemaking requirements.

(5) Transition Period

The old rules were still in place until the new regulationbecame effective on July 13, 2016. Here is a shortdescription of the requirements, before and after thatdate:

Before 7/13/16 (old regulation): For Form 1 and Form4 applications sent to ATF before July 13, 2016, trustsand business entities did not have to submit the

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Responsible Person questionnaire, fingerprints, orphotographs. Until that date, individual applicationswere required to include the CLEO certifications andsignatures.

After 7/13/16 (new regulation): All Form 1 and Form 4applications for trusts and entities submitted after thisdate must include a completed Responsible PersonQuestionnaire, plus fingerprints and photographs, for allRP’s. Applicants must send a copy of the application tothe CLEO with jurisdiction over the applicant.Responsible persons must send a copy of the RPQuestionnaire to the CLEO with jurisdiction over thearea where the RP resides.

It was advisable for all persons intending to make oracquire NFA firearms to form an NFA trust and submittheir forms to ATF before the new regulation becameeffective on July 13, 2016. Applications submittedunder the old rules did not require fingerprints,photographs, or completed Questionnaires forresponsible persons. There was also no requirement tonotify the CLEO’s that the application is being filed.The application process was somewhat less burdensomein some ways under the old rules. The major advantageof filing before the new regulation became effectivewas protecting the privacy of the applicant andresponsible persons. There was simply no reason toprovide the government with information regardingyour “responsible persons” unless there was simply noway to file your application before the effective date.Now those requirements are unavoidable.

It is likely that the time required for ATF to process anNFA application will increase, now that 41F hasbecome effective. The reason is that it will take moretime to review the information on the ResponsiblePerson Questionnaires, and to process the fingerprintsand photographs. ATF will also have to performbackground checks on all responsible persons.

It remains to be seen how the new regulation will affectthe e-filing system. The original e-filing system allowedapplications for trusts and entities to be electronicallyfiled. Individual applications could not be e-filed,because of the difficulty of obtaining quality scans offingerprints and photographs. While the original systemwas operational and accepting Form 1 and Form 4submissions, electronically filed forms were processedsignificantly faster than paper forms. The newregulations require fingerprints and photographs to be

submitted with every application, except for thosesubject to the 24-month exemption. It seems almostinevitable in the long run that the e-filing system willsurvive, but it will have to be revised to allow a largernumber of applications to be e-filed.

(6) What was the law like beforeRegulation 41F?

This section of the paper is being written in August,2016, approximately a month and a half afterRegulation 41F became effective. Most lawyers whopractice in this area are familiar with the law as itexisted prior to the regulation. But to see the changesfrom a different angle, here is how the law was differentbefore 41F:

1. Responsible Person requirement: Trusts and entitiescould submit applications with very littleinformation regarding the persons who would haveaccess to their property and control over theiraffairs (trustees, officers, directors, managers, etc.).Specifically, they were not required to submit the“Responsible Person Questionnaire,” fingerprints,or photographs. There were normally nobackground checks conducted on individuals.

2. CLEO Signature requirement: ATF requiredindividual applications to be signed by the person’schief local law enforcement officer. By signing, theCLEO generally certified that the individual wouldnot be in violation of any state or local laws bypossessing the NFA firearm, and that in theiropinion, the individual would not use the firearm forunlawful purposes..

3. Treatment of executors and administrators: ATFallowed executors and administrators to possess theNFA firearms owned by the decedent for a“reasonable time,” but this was just ATF’s policyrather than being an official regulation.

4. 24-Month Exemption: There was no 24-monthexemption for trusts and entities submitting asubsequent application, when the information hadnot changed. Each application had to be completeand include all required information.

Here is a summary which compares the old rule withthe new rule:

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Issue Old Rule (applicationspostmarked 7/12/16 and before)

New Rule (applicationspostmarked 7/13/16 or later)

Responsible Persons Individuals must submit info inapplication, photos, fingerprints.Trustees and corporate officers notrequired to submit same.

Individuals and RP’s of trusts andentities must submitquestionnaire, photos,fingerprints.

CLEO signature Required for individualapplications, but not applicationsfor trusts or entities.

No CLEO signature required.

CLEO notification No CLEO notification required(but effectively given forindividual applications).

Required for all applicants andresponsible persons.

Lawful possession of NFAfirearms by executors

Informal policy, no formal legalauthority.

Official part of ATF regulations.

24-Month Exemption No exemption from applicationrequirements.

Trusts and entities have 24-monthexemption if info unchanged.

(7) Advantages of NFA trusts that existedbefore Regulation 41F

There are several advantages that NFA trusts held overindividual applications, that may no longer exist.

(a) ATF processed applications by trustsmore quickly

In the past, using an NFA trust cut weeks or months offthe time ATF spends processing an application. This isbecause there was no requirement for a trust to submitphotos, fingerprints, or to wait for CLEO approval, butindividuals were subject to these requirements. With theadoption of Regulation 41F, trusts and business entitiesmust submit this information for their responsiblepersons, in addition to the new Responsible PersonQuestionnaire.

ATF has been reporting a significant increase in thenumber of applications (Form 1, Form 4, and Form 5)from entities, from 840 in 2000, to 12,600 in 2009, to40,700 in 2012 (excluding applications by dealers; ATFRuling 2013-2 at 10. ). An email from ATF indicatesthat they processed more than 199,900 applications(presumably including all types) in 2013:

http://www.thetruthaboutguns.com/2014/04/foghorn/atf-adding-nfa-branch-staff-reducing-backlog-re-designing-eforms-system/

I include more information on wait times in the sectionnear the end of this paper entitled “Electronic Filing.”

This is part of an overall surge in applications toacquire NFA firearms. As a result, dealers are reportingthat ATF is taking six months or so to processapplications, regardless of whether the applicant is atrust or an individual. This can be expected to changenow that 41F has become effective.

In addition, manufacturers of suppressors appear tohave a backlog of orders, in part because of the newlaws allowing them to be used in hunting. Somemanufacturers have a backlog of six months or more,from the time a dealer orders a suppressor until it isdelivered to the dealer.

(b) CLEO approval was not requiredfor trusts

Before 41F, individuals wishing to acquire NFAfirearms had to get their local Chief Law EnforcementOfficer (“CLEO”) to sign the application form. ATFregulations required this certification to come from thelocal chief of police, county sheriff of the county, headof the state police, or State or local district attorney orprosecutor. 27 CFR 479.63 and 479.85. The regulationsalso provided that certifications of other officials wereappropriate if found in a particular case to beacceptable to the Director. Examples of other officials

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who have been accepted in specific situations includeState attorneys general and judges of State courtshaving authority to conduct jury trials in felony cases.

By signing the form the CLEO was certifying that hehas no information that the NFA firearm will be usedfor an unlawful purpose, and that he had no informationthat receipt or possession of the item would place theapplicant in violation of the law.

This requirement effectively gave each CLEO the rightto prevent individuals in his or her jurisdiction fromobtaining NFA firearms. There were at least threecounties in East Texas where the CLEO refused to signthese forms (Harrison, Cass, and Rusk Counties).Because there was no requirement for trusts or entitiesto obtain CLEO approval, many persons chose to formthem because it was the only way to acquire NFAfirearms.

There are at least two states that require their CLEOs tosign these forms, Alaska and Tennessee. AS 18.65.810;T.C.A. 39-17-1361. With the passage of 41F, theselaws are unnecessary and transferees in all parts of thecountry are only required to notify their CLEO’s(except in areas where possession of NFA firearms bycivilians is illegal).

Regulation 41F replaced this CLEO approvalrequirement with a CLEO notification requirement.Now, all applicants and responsible persons of trustsand entities are required to notify their CLEO wheneverthey submit an application to make or receive a transferof an NFA firearm. The CLEO has no opportunity to“veto” the application. This is an improvement, but itnullifies one of the advantages that trusts used to holdover individual applications.

(c) Fingerprints and photos were notrequired for trusts

Previously, the requirement to provide fingerprints andphotographs along with Form 4 did not apply to trustsand business entities. Now, 41F requires trusts andentities to provide this information for their responsiblepersons.

(8) When are you required to submitinformation on “responsiblepersons”?

Many people misunderstand one key provision in thenew regulation. It does not require a trust or businessentity to notify ATF whenever a new “responsible

person” is appointed as a trustee. The only time ATFneeds any notification is when a new application issubmitted to register an NFA firearm in the name of thetrust or entity. In other words, an applicant must includethe Responsible Person Questionnaire along with thefingerprints and photographs of each RP, whenever hesubmits a new Form 1, 4, or 5 to ATF. CLEOnotification works the same way - it is only requiredwhen a trust or entity files Form 1, 4, or 5. At that pointthe applicant must notify the CLEO having jurisdictionover the place where the trust or entity is located, andeach RP must notify the CLEO having jurisdiction overhis or her place of residence.

A trust or entity is also required to notify ATF when itchanges its address (and file Form 5320.20 if it is beingmoved to a different state), but there is no requirementto provide information regarding responsible persons,or to notify any CLEO’s.

In Proposed Regulation 41P ATF mentioned that itwould like to require all “responsible persons” to obtainthe government’s approval before possessing orexercising any control over an NFA firearm(specifically mentioned in the original proposal). Thiswas not a part of the proposed rule, and was not a partof the final rule. It does signify ATF’s intentions for thefuture.

In summary, the major parts of the new regulation onlyapply when an application is submitted to ATF to makeor transfer an NFA firearm. At that point, the applicantmust provide information on responsible persons withthe application, and comply with the CLEO notificationrequirement.

(9) Impact on gun trusts and otherentities

The new rule became effective on July 13, 2016. Withthe new requirement that “responsible persons”complete the questionnaire and submit fingerprints andphotographs, the trustees of a gun trust andmanagers/partners of corporations now have to submitidentifying information. This will increase the amountof time and effort required to submit an NFAapplication.

The new CLEO notification requirement slightlycomplicates the application process. The moresignificant effect of this requirement is to disclose thefact that a trust or entity has submitted an application.We should watch closely to see if any criminals are

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apprehended attempting to buy NFA firearms. If not,then this requirement will prove to be a waste of timeand effort, and an unjustified intrusion on privacy.

The new rule formally authorizing executors andadministrators to possess a decedent’s NFA firearms isan improvement to the law. Now those persons havebinding authority that protects them from prosecution.

Even with the new requirements, a gun trust stillprovides benefits that simply cannot be realized throughindividual ownership, or ownership by a businessentity. These include:

1. Protection from prosecution: An NFA trust allowsfriends and family members appointed as trustees topossess and have access to NFA firearms withoutfearing arrest or prosecution for possession of anNFA firearm by someone other than the registeredowner. This is perhaps the single biggest advantageof an NFA trust.

2. Use of and access to NFA firearms: An NFA trustallows any trustee to possess and use the NFAfirearms. An individually owned NFA firearm mayonly be lawfully possessed by the registered owner.

3. Tax-free transfer: NFA trusts will make it easier totransfer NFA items (appointing different trustees totransfer control of the trust, instead of submitting aForm 4 and paying the tax for a transfer throughATF).

4. Continuity: A gun trust allows continuity of controlover NFA items, even if individuals pass away orcease to be involved, by appointing other persons astrustees.

5. Estate planning: A gun trust (for NFA firearms orjust for ordinary guns) allows the owner toseparating firearms from the rest of his or her estate,treat them as family heirlooms, and preserve themfor future generations. Firearms that are just treatedas part of the estate may be sold instead ofpreserved, and may be given to beneficiaries whodo not appreciate them.

6. Compliance: A gun trust provides detailedinstructions to heirs and beneficiaries on how tocomply with the law. This ensures that they complywith the various federal, state, and local gun controllaws.

ii. Electronic Filing.

On July 10, 2013, the Acting Director of the ATFapproved ATF Ruling 2013-2, which authorized theagency to accept Forms 1 and 4 (among others)electronically. This system was intended to bring theNFA section into the 21st Century, and shorten the waittime between filing an application and receiving it backwith ATF approval.

NFA forms are electronically filed at a special siteestablished by ATF for that purpose,https://www.atfonline.gov/EForms. The transfer taxmust be paid using https://pay.gov. Bot sites requireregistration, and are available to firearms dealers, not toprivate citizens.

This e-filing system, which is called “eForms,” isimportant to purchasers of NFA items, and to thelawyers who represent them. The reason is, as the waittime is reduced, more people purchase NFA items.

(1) 7/10/13 Rule

The ATF ruling authorizing the eForms system is here:

https://www.atf.gov/sites/default/files/assets/pdf-files/atf-ruling-2013-2.pdf.

There are two limitations. First, use of the site requiresregistration by a gun dealer (with one exceptiondescribed in the next paragraph). Second, forms thatinclude photographs or fingerprints cannot be e-filed.Before 41F, only individual applicants were required tosubmit photos and fingerprints. Because trusts and otherentities were not required to do so, ATF would allowthem to file Form 1 and Form 4 electronically. Now thattrusts and entities must also submit them for theirresponsible persons, we can only hope that E-file 2.0allows this information to be submitted electronically.

There is one circumstance where a nondealer could e-file an application, even after ATF suspended most ofthe system and began working on E-file 2.0. Nondealerswere allowed to e-file Form 1 (an application to makean NFA item), if the applicant is a trust or other entity.In other words, an application to make an NFA itemand register it in the name of a trust, could be e-filed.When 41F became effective, ATF stopped acceptingForm 1 electronically.

As noted above, ATF requires the entire trust documentto be submitted with the application. When the

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application is e-filed, the trust must be scanned andsubmitted along with the application.

(2) Technical Difficulties

The eForms system first came online on August 3,2013. Since that date ATF has had serious problemswith the system, including unexplained crashes,problems with different browsers, system freezes, andother issues. ATF advised that the site was notcompatible with Google Chrome, but some NFAdealers reported that it only worked with that browser.In April 1, 2014, ATF notified users that the problemswere caused by multiple users submitting formssimultaneously using the same account.

On April 5, 2014, ATF took the eForms system downand posted a message saying it would be unavailable“until further notice.” ATF put the system back onlineon April 25, 2014, but only for Form 6 (to importfirearms). ATF began accepting Form 1 througheForms on June 24, 2014. As of August 25, 2014, ATFwas accepting Form 1, Form 6 and 6a (both for use inimporting NFA items), and Form 2 (for a business tomanufacture or import a firearm). By January, 2015ATF had resumed accepting Forms 1, 2, 5, 9, and 10electronically, according to ATF’s “eForms News”posted at https://www.atf.gov/file/11726/download. Asof July 30, 2015 ATF still was not accepting Form 4 orForm 3 through the eForms system. In that newsletterATF stated that they hoped to resume accepting thoseforms by late 2015. As of August 8, 2017, ATF wasallowing dealers to submit Forms 3 and 5 electronically.

(3) Decreased Wait Times

In 2007 - 2008, it typically took one or two months forATF to process a paper application. According tohttp://www.nfatracker.com and the NFA dealers whospoke to me, the wait time gradually increased toaround six months in 2012. In the months before e-filing, wait times had increased to 10 - 11 months.

When the eForms system first came online, wait timesfor electronic filings were around 5 - 6 months. Withpaper forms, wait times were approximately threemonths longer (8 - 9 months). While eForms wasactive, wait times decreased to a low of approximately3 months, before the technical difficulties began.

At the beginning of 2014, the NFA Branch had a totalof nine (9) examiners to review applications for theentire country. In the first six months or so of 2014,

they increased that number to 15, and by August, 2014it stood at 26, with plans to hire up to five additionalexaminers in the near future.

This hiring spurt allowed ATF to decrease the backlogof applications from 86,000 in February to a little morethan 50,000 in mid-July. This has decreased the averagewait time by approximately one month. Apparently thisis the first time in years when the backlog has actuallydecreased. ATF’s announced goal is to drop the waittime to under six months.

As of August 25, 2014, the wait time for electronicallyfiled applications was approximately five months, andthe wait time for trust forms filed in paper form wasapproximately nine to ten months. As of July 30, 2015,ATF was processing applications filed between3/2/2015 and 5/22/2015. This means the wait time haddecreased to approximately two to five months.

Dave Matheny of Silencer Shop posts information onthe time taken to process their applications athttps://www.silencershop.com/atf-wait-times. Thanks toDave and to http://www.nfatracker.com for most of thisinformation on processing times.

As of August 8, 2017, Silencer Shop showed thatapplications of all types were taking approximately oneyear to process (with relatively minor variations amongtypes). NFATracker was showing wait times ofapproximately eight to ten months for all types ofapplications.

Wait times for Form 3 (transfers between dealers) havealso increased. Remember, a dealer can’t submit a Form4 for a customer until he has the NFA item in hispossession, so he can include its serial number on theform. Therefor the processing time for Form 3 affectscustomers because it directly adds to their wait times.One NFA dealer reported that before the eFormssystem, it took approximately 1 ½ weeks for a Form 3to be approved. In 2014 it was taking 6 - 8 weeks. As ofAugust 8, 2017, Silencer Shop was reporting thatelectronically submitted Forms 3 were taking one tothree weeks, and paper Forms 3 were takingapproximately seven weeks. Whenever ATF speeds upprocessing of Form 3, it speeds up approval of Form 4and therefore decreases the total time required topurchase an NFA item.

Wait times can vary drastically. One NFA dealerreported to me that he received a Form 4 back inapproximately nine months, and another Form 4 back in

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approximately 13 months. Both were submitted on thesame day and for the same customer. His record waittime is approximately 1 ½ years. On the other hand,David Goldman reported that one of his clients receiveda Form 1 back, approved, in one day. Dave Mathenyreports that he received one Form 4 back in 30 days.The best guess is that these are the result of some sortof mistake where forms are somehow moved out oforder.

(4) Changes with Regulation 41F

When Regulation 41F became effective, ATFannounced that the e-filing system would be“temporarily unavailable” for filing Form 1 and Form5. The good news is that ATF resumed accepting Form3 through the e-file system on July 7, 2016. At least thiswill make it quicker for dealer-to-dealer transfers to beprocessed.

(5) Future Improvements

Dave Matheny of Silencer Shop discussed the currentstatus of the eForms system with me on August 25,2014. He attended an industry roundtable conducted byATF on July 22, 2014, along with some of the highest-volume NFA dealers in the country. ATF announcedthat it was working on “eForms 2.0" with anothercontractor. They intend to leave the current system inplace, but have no way to repair glitches. For thatreason ATF will probably not resume accepting Form4 electronically until eForms 2.0 is up and running.

Another NFA dealer told me that an ATF employeetold him over the phone that they expected to resumeaccepting Form 4 through the eForms system some timein November.

ATF hoped to have eForms 2.0 running some time inthe last quarter of 2014, but did not make any promises.As of August 20, 2016, the system was still not up andrunning. Here is some additional information regardingthe roundtable held back in mid-2014:

http://www.silencershop.com/eforms-20-industry-roundtable/

An ATF email to eForms subscribers, which discussesthe measures the agency is taking, is posted here:

http://www.thetruthaboutguns.com/2014/04/foghorn/atf-adding-nfa-branch-staff-reducing-backlog-re-designing-eforms-system/

What does all this mean for future wait times? Thereare at least three variables. First, eForms 2.0 couldcome online, making it possible to file Form 4 andForm 1 electronically once again, and significantlyspeed up the process. Second, if ATF keeps the largenumber of examiners on the job, the additional attentionto applications should eventually eliminate the backlogthen directly reduce wait times. Third, Regulation 41Fwill almost certainly increase wait times because of theadditional information, but it could greatly cut them fortrusts and entities using the 14-month exemption.

c. Advantages of NFA Trusts

i. Access to NFA firearms

One of the biggest advantages of an NFA trust is thatany of its trustees can lawfully possess the NFAfirearms. An individual who owns NFA firearms couldrun into trouble with the law for “transferring” the itemto another person, even if he simply lets the otherperson hold it or shoot it. The other person could beprosecuted for possessing an NFA firearm which is notregistered in his or her name. An NFA trust allows anytrustee lawfully to possess the NFA firearms, withoutviolating the NFA.

One danger facing owners of NFA firearms and theirfamilies is a legal concept called “constructivepossession.” In this context, it means that a person whohas access to an NFA firearm can be considered to haveactual possession of the item. This may be because theperson has the combination to the gun safe, has a key toit or access to a key, or simply has access to thepremises where the NFA firearm is stored. Thus, aperson who is not allowed legally to possess NFAfirearms can be charged with possessing them, even ifhe never actually touches them.

The government has used this argument to prosecutemarried couples where one spouse is a gun owner andthe other spouse is a convicted felon. The felon ischarged with being a “felon in possession” of firearmsin violation of 18 U.S.C. § 922(g)(1), and the spouse ischarged with knowingly delivering a firearm to aconvicted felon in violation of 18 U.S.C. § 922(d). Thegovernment could make this argument against anindividual who owns NFA firearms, claiming that thespouse violated the law by having access to the gunswithout registering as an owner with ATF.

A person who owns NFA firearms must take steps tolimit any other person’s access to them. This includes

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spouses, children, roommates, friends, relatives,business partners, and everyone else who is not listedwith ATF as owner of the items, or a trustee of the NFAtrust. A person whose spouse is not listed as an ownerwould be well advised to keep all NFA firearms in alocked gun safe, and not allow the spouse access to thekey or combination. Even with such steps, it would bedifficult or impossible to prove in court that the otherspouse could not gain access to the items.

Unlike a prosecution under the “felon-in-possession”statute, a prosecution for violating the NFA does notrequire the defendant to be a prohibited person. Placingthe NFA firearm in an NFA trust and making bothspouses trustees should eliminate this risk. Another is toform a corporation or similar entity, and give the spousea position with the company that allows him or heraccess to the NFA firearms. This doesn’t relieve thetrustees of the obligation not to allow other personsaccess to the items, but it does allow trustees accesswithout having to fear prosecution.

ii. Protection from criminal prosecution

An individual owner of an NFA firearm risksprosecution if he loans it to another person, allowsanother person to use it under his direct supervision, oreven stores it where another person could potentiallyhave access to it. That is because the individual owneris the only person legally allowed to possess the NFAfirearm. An NFA trust allows the other trustees topossess the item without fearing prosecution.

A trust also provides for orderly transfer of control ofthe NFA firearms upon death or incapacity. A well-drafted trust will not allow a prohibited person tobecome a trustee, to possess the NFA firearms, or toreceive a trust distribution that includes firearms.

A well-drafted trust document also provides multiplewarnings to the trustees that NFA firearms are subjectto strict state and federal laws. It can also warn trusteesof the specific requirements, and its provisions canprevent them from taking action that would violatethose laws.

iii. Continuity

Another important characteristic of a living trust iscontinuity. If one or more of the trustees passes away,or ceases to be a trustee, the trust continues to exist.This characteristic is especially important when theproperty in the trust includes NFA firearms, because

most transfers of NFA firearms require an applicationto ATF and payment of the $200.00 transfer tax. Soeven if the trustees change, the trust remains the owner,and there is no requirement to submit paperwork to thegovernment and pay the $200.00 transfer tax.

One other advantage is that if it ever becomes illegal totransfer NFA firearms (by a change in state or locallaw, or federal law), holding the items in a trust mayprevent loss of the items. This is because the trust willcontinue to exist, and no transfer will be necessary(although the trustees may change). Of course thisdepends on the exact language of any changes to thelaw, which is impossible to predict.

iv. 24-Month Exemption

New Regulation 41F creates a 24-month exemption fortrusts and business entities which have had anapplication approved by ATF in the preceding 24months, if the information on responsible persons hasnot changed. 27 CFR § 479.85(c).

This means that an NFA trust submitting a secondapplication (as maker or transferee) in a 2-year perioddoes not have to send the responsible personquestionnaire, fingerprint cards, or photos. It alsomeans ATF may take less time to process theseapplications. Before 41F, ATF processed applicationsby trusts more quickly than applications by individuals,for this same reason. Therefore this exemption makes iteasier and quicker for trusts to prepare followupapplications, and it should make it easier and quickerfor ATF to process them.

d. Steps involved in acquiring or making NFAfirearms (including forming a trust ifdesired)

i. Order NFA firearm

A civilian wishing to acquire an NFA firearm must firstcomplete and submit ATF Form 4. The dealer ortransferor must first have the NFA firearm legallytransferred into his or her name and take possession ofit. This is because Form 4 requires the applicant to statethe name and address of the manufacturer, type offirearm, caliber, model, barrel length, overall length,and serial number of firearm.

ATF tracks ownership of NFA firearms by dealersusing Form 3 (dealer-to-dealer transfer). On receipt ofa Form 4 requesting to transfer an NFA firearm from adealer to a civilian, ATF checks to make sure the

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firearm is registered to the dealer.

A civilian may also apply for permission to “make” anNFA firearm, by filing Form 4. In this context, the term“make” does not necessarily mean to manufacture acomplete firearm from scratch. In most situations, acivilian who “makes” an NFA firearm assembles it fromalready manufactured parts. For instance, a person can“make” a short-barreled rifle by removing the longbarrel and replacing it with a short one, or by sawingoff the end of the barrel (and hopefully recrowning it).ATF has taken the position that it is unlawful to possessall those parts until the application has been approved,so it may be best not to acquire all the parts until theapplication has been approved.

ii. If using a trust, draft and execute it.

The settlor should transfer a nominal amount of assetsto the trust (such as $100.00). Without any property, thetrust does not exist. Texas Property Code § 112.005.

iii. Complete and submit Form 4 (or Form1).

When the dealer receives the item, complete and submitForm 4 for transfers (Form 1 to “make” an NFAfirearm) and pay the appropriate tax.

If the transferee is a trust:

1. List the trust as the transferee on the form;

2. Provide the name and address of the principalofficer or an authorized representative; and

3. Provide a complete copy of the actual trust (aCertificate of Trust is not sufficient).

If the transferee is an individual:

1. List the individual as the transferee on the form;

2. Submit the individual’s fingerprints on FBI FormFD-258; and

3. Submit a 2" by 2" passport photo of the individual,taken within one year prior to the application, oneach of the two copies of the form.

27 C.F.R. § 479.63.

iv. Submit two complete copies of Form 4 (orForm 1) with the proper tax.

The tax is $5.00 for “any other weapon,” and $200.00for all other NFA firearms.

v. Notify the CLEO.

Before submitting Form 4 (or Form 1) to ATF, thetransferees and responsible persons must notify theirchief law enforcement officer (usually the police chief,sheriff, head of state police, or district attorney) of theapplication. Transferees must submit a copy of Form 4(or Form 1) to the CLEO with jurisdiction over thetransferee’s location. Responsible persons of trusts andentities must submit the Responsible PersonQuestionnaire (Form 5320.23) to the CLEO withjurisdiction over the responsible person place ofresidence. 27 CFR § 479.84.

vi. Wait for ATF to approve the applicationand return it with the tax stamp.

This is the time-consuming part of the process.Processing times typically range from five months to ayear or more.

For Form 1 applications, the applicant is free to “make”the firearm once the application is returned by ATFwith the tax stamp.

vii. Complete Form 4473 and submit toNICS check

Once Form 4 is approved and the tax stamp issued, oneof the trustees will go to the transferor to pick up thefirearm. The person who takes possession of the NFAfirearm from the transferor must be a trustee. He or sheshould take a copy of the form appointing him as atrustee, when he goes to pick it up, so he can show it islegal for him to possess the item on behalf of the trust.Obviously the person must not be a prohibited person.

If the transferee is a dealer, the trustee will have tocomplete Form 4473 and submit to a NICS check. Thetrustee will also have to provide documentation of thetrustee appointment, to show he or she is authorized bythe trust to possess the NFA firearm.

It is a federal felony to knowingly make a falsestatement on Form 4473, or show false identification toa gun dealer. 18 U.S.C. § 922 (a)(6).

viii. Take possession of (or “make”) theNFA item.

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A trustee may now take possession of the item (Form 4transfers), or “make” it (Form 1).

e. Risks

i. Normal estate planning risks.

Drafting an NFA trust involves the normal risksassociated with drafting any trust. Whenever a lawyerdrafts a document, there is a risk of drafting errors. Thisrisk is magnified when a lawyer practices outside hisarea of expertise, for example when a lawyer who is notfamiliar with the law governing trusts attempts to draftone. These risks are greatly increased if the lawyer failsto take the time to become familiar with the client’ssituation.

Another risk, which is especially relevant to estateplanning, is when a situation later arises that theattorney did not foresee. A living trust will probably beactive for the life of the client, and for some timethereafter. There are many things that could happenduring that time that could have significantconsequences to the client and his family, and theoutcome of some of those may depend on the languagein the trust.

ii. Interstate transportation of NFAfirearms.

To transport certain types of NFA firearms to anotherstate, even temporarily, a person must submit ATFForm 5320.20 and get it approved. 18 U.S.C. § 922(a)(4), 27 CFR 478.28. Form 5320.20 is located here:http://www.atf.gov/files/forms/download/atf-f-5320-20.pdf. This requirement applies to destructive devices,machineguns, short-barreled rifles, and short-barreledshotguns. It does not apply to suppressors or AOW’s.Some owners submit Form 5320.20 for all NFAfirearms, from an overabundance of caution. Having anapproved form may help in an encounter with local lawenforcement, even though it may not be technicallyrequired.

It is also possible to move the situs (location) of thetrust from one state to another. In addition to ATFapproval discussed above, it may also be necessary tomodify or replace the trust with a document appropriateto the new state. The trustees will have to research thelaw of the new state and confirm it is legal to own andpossess NFA firearms there. They will also need todetermine whether there are any special requirements.

iii. Inadvertent transfers to prohibitedpersons.

State and federal law make it illegal for prohibitedpersons to possess firearms. It is also illegal to sell ordispose of a firearm to a prohibited person. Eventhough there is not an explicit prohibition on such aperson serving as a trustee, settlor, or beneficiary, thiscreates significant risks and special draftingconsiderations for the attorney.

A trustee’s duties require him or her to preserve,protect, and control the trust property, for the benefit ofthe beneficiary. A prohibited person CANNOT legallypossess firearms. Therefore I believe it is impossible fora prohibited person to serve as trustee of an NFA trust.Texas Property Code § 112.008 requires a trustee tohave capacity to hold the trust property, which couldprevent prohibited persons from serving as trustees forNFA trusts. The trust should make this prohibitionexplicit, and state that any purported appointment of aprohibited person as a trustee is void. The trust shouldalso provide that any trustee who subsequently becomesa prohibited person must IMMEDIATELY resign.

It is unlikely that a prohibited person will ever come toyou wanting to form an NFA trust. But there is no legalreason why a prohibited person cannot be a settlor of anNFA trust, as long as his or her involvement is limitedto donating other property (not a firearm) to the trust.For instance, a prohibited person could provide thefunds to purchase an NFA firearm, to be transferred tothe trust. A settlor cannot transfer an NFA firearm tothe trust because that would probably involvepossessing the firearm before the transfer.

A more likely scenario is where the client wants to forman NFA trust, but one or more of his beneficiaries is aprohibited person. In that case, the attorney must takespecial care to explain the law to the client. The trustshould be drafted to require sale or transfer of the NFAfirearms to other persons, to avoid ANY possibility ofa transfer to the prohibited person. The attorney shouldcarefully scrutinize the other provisions of the trust toavoid other problems.

iv. Transfers without Form 4.

NFA firearms cannot be transferred without submittingForm 4 and receiving ATF approval. For transfers toheirs, Form 5 is used. The client may know this, but hisheirs and family members may not. This creates a riskthat a subsequent trustee or family member may transfer

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an NFA firearm into or out of the trust without Form 4,risking prosecution.

For this reason, the client must make sure his heirs learnof the existence of the trust, and of the specialrestrictions on NFA firearms. The trust and otherdocuments should be drafted to educate the othertrustees, heirs, and family members of theserequirements.

v. Inadvertent violation of firearms laws.

There are thousands of state, federal, and local gunlaws. Most of these laws impose severe penalties forany violation, often regardless of whether the personhad any intent to commit a crime or was even aware ofthe law. In other words, gun laws are “zero tolerance” -good intentions don’t usually matter.

The NFA is a particularly technical law. It is imperativefor an owner of NFA firearms, and any trustees of anNFA trust, to understand and comply with the law. Asdiscussed above, the client is probably much morefamiliar with firearms and the law than his or herfriends and relatives are. They may be completelyignorant of them. A trust can give instructions to thetrustees to fulfill their legal duties regarding NFAfirearms. Without this information the client’s heirs andexecutors may not have this information, or even realizethey need to take special care with NFA firearms. Theclient (and the client’s lawyer) should do everythingpossible to make sure this gift does not result in themdoing hard time in the penitentiary. An NFA trust canand should be a tool to educate the trustees and keepthem out of trouble.

vi. Changes to the law.

Most people who sign a will (or trust) take it home andput it in their files, and forget about it. The average layperson does not follow changes in the law. Trusts areoften in existence for many years, and for that reasonthe law governing them is very stable.

Guns are a VERY political subject. Machine guns,suppressors, destructive devices, and similar items areeven more touchy. The law governing these items canchange with the blink of an eye, or more accurately,with a single election. Trustees absolutely must stayinformed about state and federal law, and be preparedto move quickly to stay out of trouble should the lawchange.

f. Losing Form 4; Problems with the NFRTR

As mentioned above, ATF maintains a nationaldatabase of NFA firearms, known as the NationalFirearms Registration and Transfer Record (hereinafter“NFRTR”). This is required by 26 USC § 5841. TheNFA requires owners of NFA firearms to keep theoriginal stamped Form 4, and to present it to ATF onrequest. 26 U.S.C. § 5841(e). Apart from this legalrequirement, there are practical reasons to keep thepaperwork safe.

The NFRTR is notoriously inaccurate and incomplete.In 1996 an ATF training video was publicized, in whichan ATF official said that the agency’s officials alwaystestify that the database is 100% accurate, but heacknowledged “that may not be 100% true.” Heindicated that the error rate may be as high as 50%when he took over, but claimed that it had been reducedto approximately 8%. The video is posted here:

http://www.armsandthelaw.com/Static/rollcall2meg.mp4.

After the video came out, the Department of Justicedistributed a packet to all U.S. Attorneys’ offices,requiring disclosure of the problems in all NFAprosecutions. U.S. Department of Justice, CriminalResource Manual 1436 (Oct. 1997), posted athttp://www.justice.gov/usao/eousa/foia_reading_room/usam/title9/crm01436.htm. The NFRTR wassubsequently investigated by the Inspector General, andwas the subject of Congressional hearings. ATF alsoran into problems in court as a result of theinaccuracies.

Owners of NFA firearms have run into significanttrouble when their forms were lost or destroyed and theNFRTR erroneously showed no record of theregistration of their NFA firearms. It is commonknowledge in the NFA community that you do not relyon the NFRTR for proof that your NFA firearm isproperly registered. The stamped Form 4 is the onlyreliable proof that an NFA firearm is properlyregistered in the owner’s name. If the owner loses hisForm 4, he could be prosecuted and convicted ofpossessing an unregistered NFA firearm. I suggestkeeping a copy of the stamped Form 4 with the NFAfirearm, and keeping the original in a safe, secure,fireproof place like a gun safe.

g. Drafting NFA Trusts

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An NFA trust must be designed from the ground up tobe legally valid, and to provide the maximum benefit tothe client. They should also be as thorough and flexibleas possible. The attorney should be willing to customizethe forms to meet the client’s particular needs.

i. Conduct an adequate consultation withthe client.

At a minimum, I believe the attorney should obtain thefollowing information from the client:

a. Settlor: The full name, address, phone number, andother contact information such as email address ofthe settlor (the person forming the trust, normallythe client). If the client is married, then his or herspouse should normally be a settlor as well. Theattorney should also to gain an understanding of theclient’s knowledge of guns, firearms laws, and theNFA. Some nonlawyers know as much or more thanlawyers about these subjects. Some people knownothing at all about them.

b. Trustees: The client should name additional personsas trustees or successor trustees, in case he dies oris incapacitated. If the settlor wants to give otherpersons access to the NFA firearms, he or she willneed to name them as trustees as well. What “line ofsuccession” does the client want? Who will serve astrustees? Will they all begin serving immediately, orwill some only become trustees in the event ofvacancies (successor trustees)? What happens if allnamed trustees, including successors, die or becomedisabled? The client should also obtain the fullname, address, phone number, and other contactinformation for each trustee. Normally the settlorwill also serve as one of the initial trustees. Theattorney should ask some additional questions, inparticular about the trustees’ knowledge of guns andgun laws. Do they care about guns? Do they knowanything about NFA firearms? Can they be trustedto follow the law? Are they responsible and matureenough to handle this responsibility?

c. Beneficiaries: What does the client want to happento the trust property once the trust terminates?Should it be sold, or should it be transferred to afriend or family member who has an interest in NFAfirearms? The attorney should also obtain the fullname, address, phone number, and other contactinformation for each beneficiary, in addition to thesame information required regarding trustees.

d. Trust property: A general description of the NFAfirearm(s) and any other property to be transferredto the trust.

e. Transferor: The name and contact information forthe transferor. Normally this will be the dealerselling the item(s), but in some cases a person mightwish to transfer individually owned items to a trust,or accept a transfer from someone else.

f. Criminal history: It is essential to determine if anyof the possible settlors, trustees, or beneficiaries areprohibited persons. Some people may not be willingto disclose this information truthfully, so it may beadvisable to run some form of background check.

g. Control: What degree of control should the othertrustees (other than the settlor/trustee) have? Whathappens if there is a disagreement among thetrustees?

h. Estate planning information: A trust is an estateplanning document. The attorney should obtaingeneral information from the client about his or herestate, debts, net worth, plans for disposing of hisproperty, and any special estate planningconsiderations. What are the client’s broader estateplanning goals? Does the client already have anestate plan in place, or any estate planningdocuments such as a will or trust? If so, the attorneyshould review it to make sure there are no conflictswith the terms of the NFA trust. Will the NFA trustaffect the existing estate plan? Asking thesequestions may also result in additional business, ifthe client desires a complete estate planningpackage.

ii. Consider the client’s overall situation,and general estate planning needs.

An NFA trust is an estate planning document that isadapted to a specific purpose. Do not forget to addressyour client’s estate planning needs. The standard intervivos trust (and therefore the one I use as the basis formy NFA trust) is designed to be used as an estateplanning document, conveying the settlor’s assets afterdeath to the person(s) chosen as beneficiaries. It alsoconsiders the fact that those persons may not be adultswhen this occurs.

iii. Thoroughly educate the client (and to theextent possible, the other trustees)regarding the legal principles andrequirements for acquiring, possessing,

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and transferring NFA firearms.

This should be done verbally, so the client can askquestions and the attorney can confirm the informationhas been absorbed. This should also be done in writing,so the client can refer back to the information, so theother trustees can review it, and so the attorney canprove he gave proper advice to the client.

The specific process should be adjusted based on theknowledge and sophistication of the client.

iv. Start with the standard form

I suggest that you begin with the standard RevocableLiving Trust form. This form has been drafted bypeople who draft trusts and other estate planningdocuments for a living. It has been tested in court overthe years. If you review the form, you will see that it isvery thorough and versatile, and it covers a lot ofeventualities.

v. Draft a valid trust.

As noted above, it is imperative to draft a valid trust.An invalid trust could render your client a convictedfelon.

Persons unfamiliar with trusts (including lawyers) maybelieve they can simply create a trust naming the settloras the sole trustee and sole beneficiary, and be fullyprotected. This is not the case. Here are somesuggestions for drafting a valid trust:

1. Settlors: Normally the client will be the settlor. Ifthe settlor is married, the spouse should normally bea settlor also. This eliminates the possibility ofsubsequent claims that the spouse lacked authorityover the property. It also reduces the chance of anysubsequent challenge by the other spouse, forinstance of excessive gifts, or fraud on thecommunity.

2. Revocability: Normally an NFA trust should berevocable. That allows the settlor to amend the trustif needed, which can be important shouldcircumstances change. This also allows the settlor torevoke the trust and retake ownership of the trustproperty. Of course the trust must provide that itcannot be revoked until Form 4 is submitted andapproved. Making a trust revocable can also havetax consequences, but this should not be a problembecause most NFA trusts will never generate any

income, unless the trust sells its assets and makes aprofit.

3. Trustees: Make sure the client appoints trustees hecan trust. Normally the client will want to beappointed as a trustee, to retain some control overthe trust and trust property.

4. Beneficiaries: To avoid merger problems, do notappoint one person as the sole trustee and the solebeneficiary. In other words, appoint at least onebeneficiary who is not a settlor. The settlor can beone of the beneficiaries. This could be important ifthe trustee is disabled, because he may needfinancial support from the trust. Assuming yourclient wants to be a beneficiary, there is probably noway to avoid the “self-settlor rule.” But you shouldadvise your client that the property he donates to thetrust will probably be subject to claims of hiscreditors. Make special provisions if anybeneficiary is a prohibited person. Normally thiswill mean selling the NFA firearms beforedistributing trust property to that beneficiary.

5. Spendthrift trust: Normally you should make anNFA trust a spendthrift trust. This reduces thepossibility that a beneficiary could get into troubleand assign the trust property to a third party.

6. Partial invalidity: Include a clause stating that if anyprovision in the trust is found to be invalid, theremainder of the trust will remain in full force andeffect.

7. Powers of trustees: One motive for forming an NFAtrust is to give the trustees access to NFA firearms.The normal motive of relying on the trustee’sjudgment to administer the trust property is lessimportant than normal. Therefore the settlor of anNFA trust will want to retain maximum control overthe trust and property. Normally a settlor who holdson to too much power may run afoul of the tax laws.But in the case of an NFA trust, which will probablynever generate income, these considerations maynot matter. For this reason you should considergiving the settlor/trustee as much power as possible,compared to the power given to the other trustees.This could be done through an explicit allocation ofdecision-making power, or by requiring asupermajority for certain decisions.

8. Signatures: Make sure the trust is signed by eachsettlor and trustee (or have trustees sign a document

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accepting appointment as such, representing thatthey have read the trust, and agreeing to complywith the terms).

vi. Customize the trust for its intendedpurpose.

An NFA trust should have numerous provisions that aredrafted specifically for owning and possessing NFAfirearms.

In many cases, the attorney drafting a trust will meetwith the client (usually a settlor and a trustee), but willhave no chance to meet any of the other trustees orbeneficiaries. That makes it difficult or impossible togauge their knowledge of guns and gun laws, and toadvise them regarding the law. For these reasons andmore, the trust form should include repeated warningsthat all transfers of NFA firearms require submissionand approval of Form 4, and payment of the transfertax. It should also include repeated, redundant, stridentwarnings that prohibited persons cannot possessfirearms, ammunition, or components, including NFAfirearms.

An NFA trust should generally encourage the trustee(s)to obtain additional training regarding the safe use andstorage of firearms, and the legal requirements ofowning guns and NFA firearms. If the trust has assetsavailable other than the NFA firearms themselves, thetrust may provide funding for such training. It can alsopay for legal advice to the trustees regarding trustmatters.

Remember that most clients will not want the trust torequire sale of any NFA firearms to fund training oranything else, unless it is absolutely necessary. In fact,most clients who go to the expense and trouble ofobtaining machine guns and similar items will considerthem family heirlooms. For that reason my standardtrust from requires the trustees to preserve NFAfirearms unless it is impossible, or unless thesettlor/trustee specifically authorizes their sale.

vii. Limit civil liability as much aspossible.

The forms are designed to protect the client and theother people involved with the trust from civil liability.It absolves settlors who are also trustees from most civilliability to the beneficiaries. It may include a provisionrequiring the trust to indemnify any trustee for goodfaith actions, similar to the ones which are

commonplace in corporate law, although this couldresult in the forced sale of the NFA firearms.

Because a trust is not an entity, it will not confer limitedliability. Therefore the trustees may be liable to thirdparties for injury or death resulting from their actions.If this is a serious concern, the client should considerforming an NFA corporation, and more importantly,recruiting more responsible trustees who will not placeothers at risk.

viii. Limit criminal exposure as much aspossible.

The attorney’s paramount goal in drafting an NFA trustshould be to protect the client and friends and familyfrom criminal prosecution. For that reason, the trustshould be drafted to prevent the trustees from takingactions that could violate the NFA (such as transferringan NFA firearm without submission and approval ofForm 4, or allowing a prohibited person to havepossession of NFA firearms). It should also be draftedto remind the client and to educate the other principalsabout the gun laws, especially the laws governing NFAfirearms and those applying to prohibited persons.

The forms should also admonish the reader that thoselaws may change, and it is their duty to stay informed ofthose changes.

ix. Maximize client’s control of the trust andassets.

The client will likely choose an NFA trust in part toallow the other trustees access to the NFA firearms. Inmost occasions the client will be the settlor, and willalso serve as a trustee. Because the client normally paysfor the NFA firearms, he or she will want to maintaincontrol over them. Therefor the trust should give thesettlor/trustee control over disposition of the items, andit should explicitly prohibit any trustee from selling anyNFA firearm without the settlor/trustee’s permission.

x. Determine what assets the trust will hold.

An NFA trust can own assets other than just guns,including land, insurance proceeds, and investments,although that is not its primary purpose. I do not limitmy NFA trust to owning NFA firearms, but you can doso if you think it is advisable. My approach is to makesure the client is fully informed about the advantagesand disadvantages of transferring other items to thetrust, then to let the client make the decision.

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I do not recommend placing unrelated items(homestead, financial assets, etc.) in an NFA trust. Thiscould conceivably put them at risk of civil liability orforfeiture, should the client or trust ever have problemswith the authorities.

I recommend that clients also transfer accessories thatare specific to NFA firearms, to the trust. Items that arenot specific to those firearms should be kept separate.My general rule is that an item that is only usable withthe NFA firearm should be transferred into the trust. Ido not recommend placing other firearms, ammunition,or accessories into an NFA trust. For instance,magazines that may be used with an M-16 or AR-15should not be transferred to the trust. Links used tocreate belts of .50 BMG ammo for use in an M-2machine gun should be transferred into the trust alongwith the firearm itself.

The trust can own any number of NFA firearms. Thereis no need to draft a separate trust to purchaseadditional items. This is a significant selling point - theclient needs to know that once he forms one NFA trust,he locks in the advantages for all future NFA firearmpurchases, as long as the law does not change.

xi. Maximize flexibility of the trust.

In general, legal documents should provide maximumflexibility to the client. This is especially important ifthe document is going to be in effect for a long periodof time. For that reason, NFA trusts should generally berevocable, which allows it to be modified or terminatedwhile the client is still living.

Whenever a client appoints someone to manage hisaffairs, such as an attorney-in-fact (power of attorney),I always emphasize the need to designate someonetrustworthy. If there is even a chance that the personcannot be trusted, then he should not give the personpower over his affairs.

Assuming the client only appoints trustworthy personsto serve as trustees, I advise the client to make thepowers of the trustees very broad.

Remember, this document may be in place for manyyears. The trust should provide the trustees with thediscretion to adjust for changed circumstances.

xii. Provide continuity.

The trust should include numerous provisions to allowit to continue to exist as circumstances change. At aminimum it should include provisions for resignation,removal, and replacement of trustees, and forappointment of additional trustees. It should allow moreproperty to be added to the trust. It should also providefor disposition of the trust property should all thebeneficiaries die, and this provision should becoordinated with the settlor’s will if possible.

The client may choose to move, so the trust shouldallow the trustees to move the situs of the trust toanother state, The trust should also allow the trustees tomerge the trust with similar trusts, create additionaltrusts to divide the trust assets, and exercise otheroptions to adapt to future circumstances that can beanticipated. The form should also allow the client toengage in transactions between him or her personallyand the trust. You may or may not want to allow othertrustees the same option.

xiii. Maximize privacy.

Gun owners generally value their privacy. Owners ofNFA firearms are even more sensitive about this issue.This paper will discuss privacy below in more detail,but at this point it should be obvious that a properlydrafted NFA trust will preserve the settlor’s privacy tothe maximum extent possible. For instance, it shouldonly require documents relating to the trust to be filedof record when this is required by law.

A trust may also provide that any resulting disputes willbe resolved through arbitration (which the law deems aprivate matter), instead of a lawsuit (where thepleadings and other filings become public record).

ATF does require a copy of the actual trust agreementto be filed when a trust applies for transfer of an NFAfirearm, but most filings relating to NFA firearms areconsidered tax records and are therefore confidential.So ATF will have specific information regarding thetrust and the NFA firearms it owns, but the State andthe public should not have access to that information.That means that the existence of the trust, its specificterms, and the identity of the persons involved with itwill generally be private.

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xiv. Include related documents.

(1) Letter of explanation.

A client purchasing an NFA trust needs an “owner’smanual.” Some of this can be included in the trust itself,but there are numerous matters that need to beexplained but do not belong in the trust. I do this in theform of a letter.

My letter is 12 pages long. I actually used it as thestarting point for this paper. This paper contains mostof the same information contained in the letter, butobviously the letter is intended for a nonlawyer whowill be a settlor and trustee.

If the client breaks the law because you failed toprovide complete, correct advice, you could beresponsible for him/her going to prison and being finedhundreds of thousands of dollars. If the client receivesyour letter then fails to follow your advice, it will bemuch harder to hold you responsible for the resultingconsequences. Therefore the letter is the primarymethod of protecting the client and the attorney fromfuture problems.

(2) Removal of Trustee.

It is imperative that the settlor (or primary trustee) haveavailable a form to remove other trustees. There arenumerous circumstances that can necessitate removal ofa trustee without delay. If a trustee’s spouse files adivorce and a protective order or injunction is enteredwhich prohibits him or her from assaulting orthreatening his or her spouse, that order may render thetrustee a “prohibited person.” If a trustee is indicted fora felony, he or she is a prohibited person until it isresolved. A trustee may also become irresponsible ordisinterested. In any of these circumstances, the settloror other trustees may need to remove the person astrustee without delay.

(3) Appointment of Additional (orSuccessor) Trustee.

At some point in the future, the client will probablyneed a form to appoint additional trustees. I believe itis unfair to expect him to come back in and pay anadditional fee at that time, so I provide the form alongwith the trust. I like to allow the client to choosewhether to appoint the person to serve immediately("additional trustee"), or only after the client passesaway or is incapacitated ("successor trustee").

I also prefer to include a requirement for the possibletrustee to represent that he or she is eligible to serve asa trustee, and to promise to comply with the trust'sterms, before the client actually appoints him or her asa trustee. If there is later a problem with eligibility, thiswill allow the client to show that he or she did notknowingly allow a prohibited person to have possessionof NFA firearms. It also provides the client with writtenproof that the person read the trust and agreed toperform the duties of trustee, before actually beingappointed. My form must be notarized, which requiresthe candidate to make these statements under oath.ONLY after the possible trustee has signed it and hadit notarized does the form allow the settlor or existingtrustee to sign it, actually appointing the candidate as atrustee.

(4) Change of Beneficiary

From time to time, people change the beneficiaries ontheir wills, insurance policies, and retirement plans. Aperson who forms an NFA trust may need a form tochange the beneficiaries on the trust, for similarreasons.

(5) Assignment (to add property to trust)

At some point in the future, the client will probablywant to transfer additional property to the trust. Thiscould be other NFA items (which of course requiresubmission and approval of Form 4), ammunition oraccessories, or other assets unrelated to guns. Providingthis form at the time the trust is drafted is an addedvalue to the client, and may prevent him from having tohire a lawyer at some point in the future.

(6) Declaration of Trust

A Declaration of Trust is basically a summary of thetrust, providing a basic description without all thedetails. ATF requires the actual trust to be submittedwith Form 4, and will not accept a Declaration.However, a Declaration of Trust may be useful in othersituations where the client needs to provide some proofthat the trust exists, but does not wish to share theactual document.

h. Alternatives to NFA Trusts

There are two major alternative methods of acquiringNFA firearms, other than forming an NFA trust.

i. Individual ownership

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The client could have the NFA firearms transferred intohis or her individual name. That would require theindividual to go through the full application process,notify his or her CLEO, provide fingerprints andpassport photos, and pay the transfer tax for each NFAfirearm.

Individual owners have no continuity of ownership,unlike NFA trusts and NFA corporations. Upon thedeath of the individual, the executor or administratormust submit Form 5 to have the items transferred intothe heirs’ names. The individual should take steps towarn his executor or administrator of the specialrequirements pertaining to NFA firearms. Of course thetransfer is tax-free.

Individual owners cannot allow other persons to havepossession of or access to their NFA firearms.

ii. Corporation/Business entity

The client may also choose to form a corporation,limited liability company, or other business entity toown the NFA firearms. There would be costs involved,but they would not be excessive. Texas charges a statefiling fee of $300.00, plus the client will have to pay anattorney to draft the corporate documents. The entitymay also have to file state and/or federal tax returns.

The effects of forming an NFA corporation are similarto those involved with an NFA trust. The officers anddirectors of the corporation can legally have possessionof the NFA firearms. The corporate documents can alsobe drafted so they alert successors that there are specialrequirements for lawfully owning NFA firearms.

The biggest advantage of a corporation or similar entityover a trust is limited liability. The shareholders,officers, and directors of an NFA corporation wouldenjoy the same protection from civil liability thatapplies to ordinary corporations. Of course this onlycovers civil liability, not criminal responsibility, andthere are situations where the protections might notapply. Still, limited liability from civil claims is asignificant advantage, especially when there areautomatic weapons or similar items involved.

Most business entities can be structured so theirexistence is perpetual. For this reasons, business entitiesenjoy the advantage of continuity just as a trust does. Inother words, the entity (trust or business) continues toexist even if the principals (trustees, officers ordirectors) pass away or are replaced.

Shares in a corporation or other business can generallybe transferred without ATF approval. Business entitiestherefore enjoy the advantage of transferability just asa trust does. In other words, the principals (trustees orshareholders) can generally transfer ownership orcontrol of the entity without triggering a transfer of theNFA firearms and requiring submission of anotherForm 4 and payment of the transfer tax.

A business entity may also be appropriate if the clientwants to designate a prohibited person or a minor as abeneficiary. For instance, a relative who is a convictedfelon could be a beneficiary of a trust who receives theproceeds after the trust assets are liquidated. Such aperson could also be involved in some capacities witha business entity. Of course this will not allow a personto possess the NFA firearms or any other firearms,ammunition, or components, if he or she is a prohibitedperson. If any of the persons who might be involvedwith an NFA corporation are “prohibited persons,” thenthe attorney will have to customize the terms to protectthe client and other principals. The attorney must askthis question of the client.

Texas requires corporations and other businesses to paya franchise tax or business receipts tax. These taxes areusually based on income or profits, and there is arelatively high exemption, so an entity like an NFAcorporation that doesn’t generate income will probablynot have to pay the tax. However, Texas does require acorporation to file a franchise tax report and a publicinformation report, even if there is no tax due. Failingto submit these documents each year will result in theloss of corporate privileges, and eventually, revocationof the corporate charter. This could happen if theofficers and directors simply forget to file thesedocuments, or if the corporation moves and forgets toprovide its current address.

One fact of life is that the organizers of corporationssometimes do not always complete and submit therequired documents. In my litigation work, I frequentlydiscover corporations that are “not in good standing”for this reason. Suspension of corporate privileges orrevocation of the charter leaves the shareholders,officers, and directors without any protection fromliability.

Corporations also generally have to file federal taxreturns each year, which could result in some recurringcosts if the officers pay a bookkeeper, or accountant toprepare the returns.

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State law also requires corporations to hold annualmeetings and keep minutes. This can incur some coststo pay someone to prepare the minutes for thosemeetings. Of course there is nothing preventing theclient from preparing the franchise tax report, publicinformation report, federal tax return, and annualminutes.

I believe an NFA corporation involves a significantlygreater risk of problems than an NFA trust. If the clientforms a trust then fails to exercise due diligence, thenthe trust will probably still be in existence. If the clientforms a corporation the fails to exercise due diligence,then the state will eventually revoke the charter and thecorporation will cease to exist. If the corporation losesits charter, the principals will have NFA firearms intheir possession, in violation of the law. Clients shouldonly consider using a corporation or other businessentity to own NFA firearms, if they are prepared to takegreat care to meet all these requirements and keep thecorporation in good standing.

i. Privacy.

Gun owners are concerned about their privacy. Theygenerally want to avoid public disclosure of the fact thatthey are gun owners, the types of guns they own, andwhere the guns are stored. People who own devices likemachine guns and suppressors are particularlyconcerned about privacy. There are many reasons forgun owners to value their privacy. They do not wantcriminals to have a road map to their homes or theirguns. They are also concerned, in some cases with goodreason, that the government might use those lists toconfiscate their guns.

There are several recent events that highlight theimportance of privacy to gun owners. A newspaper inNew York published a map showing the names andaddresses of gun owners in parts of the state. It is acommon occurrence to hear about governmental entitiesaccidentally disclosing citizens’ private information.The various bills proposed to establish state or nationallists of guns or gun owners are a third example. Thebottom line is that gun owners should take everypossible step to prevent governmental officials or thepublic from knowing they own NFA firearms.

i. Information that must be disclosed toATF

There is no way around having the federal governmentknow who the owner of an NFA firearm is, what type ofNFA firearm(s) he owns, and where he is located.However, most filings relating to NFA firearms are

considered tax records, and are therefore not availableto the public. Under current law a person could hide hisindividual identity from the government, but at leastone of the other trustees would have to disclose hisidentity (on Form 4 as the principal of the trust and onForm 4473 as the person taking possession of the NFAfirearm for the trust).

ii. Information that must be disclosed to theCLEO

The CLEO notification requirement imposed by newRegulation 41F creates a few privacy problems. Thetransferee must submit a copy of the entire applicationto the CLEO having jurisdiction over his place ofresidence (or the situs of an NFA trust). Eachresponsible person must submit a copy of theResponsible Person Questionnaire to the CLEO havingjurisdiction over his or her place of residence. Thesedocuments may not enjoy the same confidentialityprotections as tax documents submitted to ATF. 26U.S.C. § 6103.

Note that ATF considers the applicant to be thetaxpayer who is entitled to this protection. Theapplicant for Form 1 is the person who wishes to makethe firearm. The applicant for Form 4 is the transferor,not the transferee.

iii. Trusts and privacy

A trust is generally a private document. In Texas thereis no requirement to file the trust documents or registerthe trust with the State.

iv. Corporations and privacy

In contrast, a corporation or similar entity requirespublic disclosure of significant information. Acorporation must provide additional information to thestate, when forming the entity. When the entity isformed, the organizer files a Certificate of Formation(also known as Articles of Incorporation, or charter)with the Secretary of State. The Certificate ofFormation must disclose the name and address of theincorporator (the person forming the corporation), thenames and address of the initial directors (members ofits board), the name of its registered agent (the personto notify if the corporation is sued), its registeredaddress (where its corporate books will be kept), and ageneral description of the type of business in which itwill engage.

Each year while it is in existence, the corporation isrequired to file a franchise tax report, and also provide

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a public information report including the names andaddresses of the officers, directors, and members. Theentity must also maintain a registered agent andregistered office, and notify the state if they change.

The Certificate of Formation and Public InformationReports are public records. Copies of a corporation’sgoverning documents can be accessed online, for an o m i n a l f e e , a t w e b s i t e s l i k ehttps://direct.sos.state.tx.us/acct/acct-login.asp orvarious commercial sites.

Here is a concrete example. Go to the followingwebsite: https://ourcpa.cpa.state.tx.us/coa/Index.html.Click on “Corporation Search” (the fourth link on thepage). In the window entitled “Entity name,” type“HEALY LAW,” then click on “Search by Name.” Thisshould produce one result, “HEALY LAW OFFICES,P.C.” Click on it. You can see the entity name, itsaddress, and the name and address of its registeredagent, along with some other information. Click on the“Officers and Directors Information” button, and youcan see the name and address of the director.

If you form a corporation, the same informationregarding that corporation would be available online.The Certificate of Formation, any amended versions,changes of registered agent, changes of address, theinformation provided in the public information report,and some other documents would be available to thepublic also.

v. Practice notes

From a privacy standpoint, a trust is clearly superior toa business entity.

If I were forming a corporation to own NFA firearms,I would choose a name that does not involve firearms,state the purpose as “transacting any lawful business,”and make every effort not to publicize the addresswhere the guns would be kept. You do not want to givethe bad guys directions to your gun safe. The law mayor may not require you to disclose that address in apublic record. For instance, Texas BusinessOrganizations Code § 3.005(a) requires the certificateof formation of a for-profit entity like a corporation toinclude the “registered address,” which is the locationwhere the corporate documents must be kept. There isno requirement that this be the same as the principalplace of business. I would also list my address in thepublic information reports as a P.O. box, or use abusiness address.

You might also consider paying a company to serve as

your corporation’s registered agent. That would allowyou to avoid posting your address online.

No matter how careful the client is, a criminal maydiscovery his name, and possibly the fact that he ownsNFA firearms. With some basic information, it is fairlystraightforward matter to discover his address and otherinformation from online sources. These include onlinetelephone books, similar sources like Switchboard.com,real property or appraisal district records like thoseavailable on Smithcad.org, court records maintained bygovernmental entities, employers’ websites, and socialnetworking sites like Myspace.com or Facebook.com.There are also companies like Publicdata.com thatcompile and resell public records. These includeinformation on driver’s licenses, professional licenses,voter registration, vehicle and aircraft registration, civillawsuits, real property records,, and other records. It isbecoming more and more difficult to maintain anysemblance of privacy. The fact that privacy might becompromised is no reason to ignore privacy entirely.

j. Conclusion

I do not believe the “cookie cutter” approach isappropriate for drafting gun trusts. I do not want tocompete for this business with Quicken, or Legal Zoom,or with a lay person who believes he can cobbletogether his own NFA trust from what he can find onthe Internet. I am happy to meet with people who areconsidering these alternatives, but if a potential clientcan’t see the benefits of having an experienced lawyerdraft a custom document to protect him and his lovedones, then I will gladly forego that project.

I spent countless hours researching the issues, learningnew things over the years, and custom drafting my basicform. I literally went through the inter vivos trust formletter by letter, and modified the form in all respects tofulfill the specific purposes described above. Now whensomeone hires me to draft an NFA trust, I start with mybasic form, but each NFA trust is a custom documentdrafted to meet the specific client’s needs. I meet witheach client, in person unless that is not practical for theclient, and I spend whatever amount of time it takes toexplain the process and obtain the necessaryinformation. Once the trust is drafted, I normally meetwith the client to answer any additional questions.

Drafting a document may be a routine thing for lawyers,but when a mistake could land your client or his lovedones in federal prison for many years, it deserves yourundivided attention. You should devote an appropriateamount of time to it, and charge an appropriate fee foryour work. Anything less is a serious disservice to your

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clients.

6. Legal Issues with Inheriting Firearms

a. Introduction

Alan Gassman, a renowned probate attorney fromFlorida, co-authored the remainder of this paper. Alanis the other lead author of The Legal Guide to NFAFirearms and Gun Trusts. We originally wrote thissection for nonlawyers. It was published in the March,2016 TSRA Sportsman, a magazine published by theTexas State Rifle Association. It has been adapted forthis seminar.

After a person dies, an executor or administrator isnormally appointed to administer the estate. Thatperson identifies and takes control of the assets, andpreserves them while the administration is pending. Atthe end, the executor or administrator normally pays thedebts then distributes the assets to the heirs, and files afinal report with the Court. Gun owners and theirattorneys are well advised to pay special attention tothis process.

There are a number of laws which govern the process ofinheritance. There are laws governing wills and trusts,and how they are interpreted. There are laws allowingthe probate process to be simplified, if the estate meetscertain requirements. There are laws allowing a personto include provisions in a will which waive certainformalities in the probate process. There are laws whichdetermine a spouse’s interest in property, and in somecases protect the spouse’s interest in the homestead.There are also detailed procedures governing theprobate courts. There are also laws governing intestatesuccession (inheritance without a will).

In addition, state and federal gun laws impact theprobate process. Most of these laws are written forgeneral application, and are not drafted specifically toapply in the probate context. It is important toremember that most gun laws are “strict liability” laws -a violation is punishable as a felony, regardless ofwhether the actor had any intent to commit a crime, oreven knew that his or her conduct was prohibited. Afelony conviction can result in a prison sentence, a largefine, forfeiture of the guns to the government, and apermanent prohibition on ever possessing firearms orammunition again. It is imperative to comply with allapplicable laws throughout the probate process.

This portion of the paper will focus on specific issuesinvolved in inheriting all types of firearms, not justthose regulated by the NFA.

b. Applicable Gun Laws

A number of gun laws may apply to the process ofinheritance. If the heir lives in the same state where thefirearms are located, then the personal representativeand heir must only comply with federal law and thelaws of that state. If the heir lives in another state, thenthe heir and personal representative must comply withthe federal laws and the laws of both states. Generally,federal law applies at all times, and the applicable statelaw is determined by where the guns are at the time.

i. Federal firearms laws.

There are a number of federal firearms laws that affectthe probate process. Even though most of them werepreviously discussed in more detail, here is a shortsummary:

(1) Prohibited Persons.

There are nine categories of “prohibited persons”, whoare prohibited from possessing firearms or ammunition.18 U.S.C. § 922(g). These include persons convicted ofa crime punishable by confinement for more than oneyear (felons); fugitives from justice; persons addicted toor users of illegal drugs; persons who have beeninvoluntarily committed to a mental institution ordeclared a “mental defective”; illegal aliens and personswith nonimmigrant visas; persons with dishonorabledischarges; persons who renounced their citizenship;persons subject to protective orders and similar courtorders; and persons convicted of misdemeanor crimesof domestic violence. Persons charged with felonies(including those on deferred adjudication) are alsoprohibited from possessing firearms. These prohibitionswill make it difficult for a prohibited person to serve aspersonal representative for an estate which includesfirearms or ammunition. They will also prevent aprohibited person from inheriting guns or ammunition,so they will probably have to be sold instead.

(2) Age Restrictions.

Persons under 18 years of age may not lawfully possesshandguns or ammunition that is only usable inhandguns. 18 U.S.C. § 922(x). There are someexceptions, including when the minor has a written notefrom a parent or guardian. It is illegal for a gun dealerto sell a rifle or shotgun to anyone under 18 years ofage, or to sell any other firearm (including handgunsand NFA items) to anyone under 21 years of age. Theselaws limit possession of guns, not ownership of guns.This means a minor may own a handgun or ammunitionbut not be able to lawfully possess it without

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restrictions. The normal procedure for a minor to inheritguns is for him or her to own them, but his parents orguardians to store and control them.

(3) NICS Check.

Federal law generally requires each person purchasinga gun from a dealer to complete Form 4473 and submitto a National Instant Check System (“NICS”)background check. 18 U.S.C. § 922(s). Thisrequirement does not apply to firearms transferred bysomeone other than a dealer, including guns inheritedunder a will or by intestate succession. At least inTexas, a personal representative may transfer guns to anheir without running a background check. However, itis still unlawful to deliver firearms to a person, if thetransferor knows or has reason to believe the recipientis a prohibited person.

(4) Interstate Transfers.

Federal law generally prohibits direct transfers of gunsbetween persons in different states. 18 U.S.C. §922(a)(5). The normal way to accomplish such atransfer without violating the law is to have a dealer inthe recipient’s state handle the actual transfer. There isan exception for firearms inherited under a will or byintestate succession. This allows personalrepresentatives to distribute firearms to heirs in otherstates.

(5) Mailing and Shipping Firearms.

Handguns and other concealable firearms may notlegally be sent through the U.S. Mail. 18 U.S.C. §1715. Long guns may be mailed, but must be declared.Any person may ship a firearm to a licensed gun dealer.Each carrier has its own set of policies and procedures.Guns returned after repair may be shipped back fromthe licensed dealer to the owner.

(6) National Firearms Act.

The NFA generally requires each machine gun,suppressor or silencer, short-barreled rifle or shotgun,destructive device, and “any other weapon” to beregistered with ATF. The law also prohibits any personother than the registered owner from possessing anyNFA firearm. See 26 U.S.C. Chapter 53. Before anyNFA firearm may be made or transferred, a form mustbe submitted to ATF and approved, and (if applicable)a tax of either $200.00 or $5.00 must be paid.Normally, the personal representative will completeATF Form 5, then transfer the gun to the heir once theform is approved and returned. If the gun is to be

transferred to someone other than an heir, the personalrepresentative submits Form 4 instead. This processwill be discussed in more detail below.

(7) Firearms Owner’s Protection Act.

This federal law includes a “safe passage” provisionthat allows a person to transport a firearm andammunition from one state where it may be legallypossessed to another state where it may be legallypossessed. 18 U.S.C. § 926A. There are requirementsfor how the gun and ammunition must be stored intransit. A personal representative may use this law totransport firearms to an heir, or may distribute thefirearms to the heir then allow him or her to use FOPAto return home with the firearms.

(8) Flying with Firearms.

It is lawful to fly with firearms, but there are veryspecific guidelines. In general the firearm must beunloaded, in a locked case, declared at the counteroutside the secured area, and must be checked. If youplan to fly with firearms, review the current TSAregulations and check the policies of the airline. It maybe helpful to bring hard copies of those regulations, incase it is necessary to educate an airline employee orofficial.

ii. Texas firearms laws.

The major Texas gun laws are located in Texas PenalCode Chapter 46.

(1) Prohibited Persons.

Texas law prohibits persons who have been convictedof felonies or certain types of assaults perpetratedagainst family members from possessing firearms.Texas Penal Code 46.04. After five years following thefinal release from confinement and supervision, aconvicted felon is allowed to possess firearms at thelocation where he or she lives, and a person convictedof assault family violence recovers his or her right topossess firearms under state law. This is meaninglessbecause doing so is still a violation of federal law.

(2) Prohibited Weapons.

Texas law prohibits any person from possessing an“explosive weapon” (which includes some itemsconsidered to be destructive devices under federal law),machine gun, short-barreled firearm, or “silencer,”along with some other weapons that are not firearms.Texas Penal Code 46.05. There is an exception if the

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item is properly registered through ATF.

(3) Places Weapons Prohibited.

Texas law generally prohibits possession of firearms incertain sensitive areas such as schools and colleges,court buildings, polling places, jails and prisons, barsand other areas where alcoholic beverages are stored,secured areas of airports, racetracks, and executionplaces. Texas Penal Code § 46.03. These restrictionsapply to all firearms, not just handguns.

(4) “Carrying” a Handgun.

Texas law generally prohibits anyone from “carrying”a handgun, although there are significant exceptions.Texas Penal Code § 46.02; see also § 46.15.

The most significant location where law-abidingcitizens are allowed to carry handguns is in a privately-owned vehicle, under the Motorist Protection Act.Texas Penal Code §§ 46.02(a)(2), 46.02(a-1). Thisexemption only applies if the person is legally allowedto possess handguns (not a prohibited person), is not amember of a criminal street gang, is not committing acrime above a Class C misdemeanor traffic offense, andthe gun is not in plain sight.

In addition, a person may generally carry a handgun onthe premises where he or she resides, while “traveling,”at locations where the person is engaging in a lawfulshooting or hunting activity, to and from those places,to and from places where the gun is to be repaired, andin other specified places. Texas Penal Code § 46.15(b).

There are additional locations and circumstances underwhich a person may be allowed to carry a handgun. Forinstance, in Moosani v. State, 866 S.W.2d 736, 738(Tex.App.-Houston [14th Dist.] 1993), aff'd, 914S.W.2d 569 (Tex.Crim.App.1995) (adopting court ofappeals' reasoning), the Court of Criminal Appeals heldthat a person may carry a handgun between home andwork if there is a legitimate reason, he does not do sohabitually, the route is practical, and he proceedswithout unnecessary delay or deviation. In Chiarini v.State, 442 S.W.3d 318 (Tex.Crim.App. 2014) the sameCourt held that a condominium owner, in adevelopment where the owners shared an ownershipinterest in the common areas, qualified as his “ownpremises” under § 46.02 and therefore he did notviolate that section by carrying a handgun there.

There are numerous court cases, many of them from the1800s, which create additional exceptions to § 46.02.There are cases allowing a person to carry a handgun

home after purchasing it [Pressler v. State, 19 Tex.App. 52, 53 Am. Rep. 383 (1885); Waddell v. State, 37Tex. 354 (1872)]; to take it in for repairs. [Fitzgerald v.State, 52 Tex. Crim. 265, 106 S.W. 365 (1907);Mangum v. State, (Tex. Crim. App.) 90 S.W. 31(1905); Impson v. State, (Tex. Crim. App.) 19 S.W.677 (1892); Pressler v. State, 19 Tex. App. 52, 53 Am.Rep. 383 (1885)]; to locate proper ammunition.[Waddell v. State, 37 Tex. 354 (1872)]; and to return aborrowed pistol [Inzer v. State, 601 S.W.2d 367(Tex.Cr.App. 1980); Due v. State, 123 Tex.Crim. 73,57 S.W.2d 849, 850 (1933)]. These other exemptionswere created by courts, and do not appear in the statute.This makes it difficult to create a list of all places andconditions when a person may carry a handgun. Inaddition, an accused who intends to rely on a 1885 casefor his freedom has to wonder if the modern courts willcome to the same conclusion.

The general prohibition on “carrying” a handgun doesnot apply to long guns (rifles and shotguns). In otherwords, Texas allows law-abiding citizens to carry riflesand shotguns, either openly or concealed, except inlocations prohibited by Penal Code § 46.03.

Texas also issues licenses to carry a handgun(“LTC’s”). Texas Government Code Chapter 411,Subchapter H; Texas Penal Code § 46.15(b)(6). Alicense allows the holder to carry a handgun everywherein the state, except in locations where all firearms areprohibited under § 46.03.

There have been to significant changes to the handgunlaw in the last few years. In the past, licensees couldonly carry their handguns concealed. Licenses weretherefore called “concealed handgun licenses” orCHL’s. After the law was amended in 2015, licenseholders may now choose to carry their handgunswithout concealment, in a holster. This is called “opencarry.”

In the past, license holders could carry handguns oncollege campuses, but not inside buildings. The law wasamended in 2015 to allow licensees to carry handgunsinside buildings on college campuses (“campus carry”).Texas Government Code § 411.2031. It allows publicschools to designate specific areas where guns arebanned, but they cannot impose a total ban. It allowsprivate schools to ban guns altogether. The law becameeffective on August 1, 2016 for four-year publiccolleges, then one year later on August 1, 2017 forcommunity and junior colleges.

Texas has provisions for reciprocity and recognition of LTC’s. These provisions allow Texas licensees to carry

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handguns in certain states, and allowing licensees fromcertain states to carry handguns in Texas. The licenseemust still comply with all other restrictions, includingthose governing the legal places where guns may becarried, and the manner of carry.

License holders are allowed to carry in most locations,but not all. In the probate context, the restrictions oncarrying handguns should generally only be a concernwhen an executor is delivering a gun to a beneficiary, orafter the beneficiary takes possession of a gun.

iii. Firearms laws in other states.

The laws of another state will apply whenever firearmsor ammunition is located in the other state. This mayinclude firearms owned by an estate of a person wholived outside of Texas, or firearms inherited from aTexan by a person who resides in another state. Hereare some general principles:

1. Registration: Some states require registration ofsome or all firearms.

2. Permits: Some states require an owner to have afirearms owner’s identification card or similarcredentials, before possessing a firearm.

3. Locations: Every state has restrictions on thelocations where firearms may be legally possessed.

4. Types of Firearms: Many states have restrictions onthe types of firearms that may be possessed. Thismay include so-called “assault weapons bans”which prohibit certain semiautomatic firearms; banson magazines above a certain capacity; and bans oncertain types of handguns.

5. NFA Firearms: Many states have restrictions orprohibitions on firearms regulated by the NationalFirearms Act, such as machine guns andsuppressors. Some prohibit civilians from owningthem outright. Others track the federal laws.

6. Prohibited Persons: Many states have their own listsof prohibited persons.

7. Transportation: Some states have restrictions onhow firearms and ammunition can be transported.

8. Storage: Some states have restrictions on howfirearms and ammunition can be legally stored.

iv. Choice of Law.

The general rule for gun laws is that 1) federal firearmslaws always apply, and 2) the applicable state lawdepends on where the guns are located at that time.

If a Texan dies and leaves guns and ammunition to arelative in California, Texas gun laws will apply untilthe guns are taken out of Texas. While they are intransit, the law of each intervening state will apply(along with the Firearms Owner Protection Act). Whenthe guns are brought into California to be delivered tothe beneficiary, the California gun laws will apply.

c. Transferring Firearms to Beneficiaries.

Every gun owner should take steps to ensure that, whenhe or she dies, the guns and related items pass toappropriate persons.

More and more people are choosing to draft legaldocuments without the help of an attorney. Legaldocuments are available through include softwarepackages, online services, forms available at officesupply stores, and finding free forms posted on theInternet. This is the equivalent of purchasing a Do ItYourself Home Appendectomy Kit from the ShoppingChannel. Competent lawyers use current, thoroughforms, and they have the knowledge to know whichforms to use and which provisions to include. Theygenerally get their forms from formbooks, standarddocuments drafted by experts such as the State Bar ofTexas Real Estate, Probate, and Trust Law Section, orfrom software with forms drafted by preeminentauthorities in the field such as the Wealth TransferPlanning package marketed by Interactive Legal. Mostlawyers will provide a complete estate plan for a flat feethat is quite reasonable based on the value of the estateand the amount of work needed.

i. Who Gets the Guns?

The owner must first determine what he or she wants todo with his guns and accessories, as with any otherasset. There are several basic options:

1. Leaving firearms to loved ones: Many gun ownerssee their firearms as family heirlooms. They wish topreserve those heirlooms for future generations.This may be in part because they are cherisheditems, and in part because the owner wishes to leavea legacy of freedom for his family. Gun owners whofeel this way should make special arrangements tosee their intentions carried out. An attorney draftingan estate plan for a gun owner should ask what the

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client wants to happen to his or her guns andaccessories? Should they go to gun-owningrelatives? Should the distributions be equalized invalue, so some heirs receive guns and others receivemore of something else? What happens if an heirdies before your client?

The client and attorney should determine if any ofthe persons involved (heirs, personalrepresentatives, or trustees) are prohibited persons,before executing any estate plan. A beneficiary whois a prohibited person cannot possess firearms orammunition, and therefore cannot receive firearmsor ammunition by inheritance. This may mean thatany guns will have to be distributed to another heir,or sold and the proceeds delivered to the prohibitedperson. If you know about this ahead of time, youcan take steps to comply with the law and still leavesome of you property to your heirs who areprohibited persons.

2. What about heirs who don’t want guns, or can’thave them? Another important question is whathappens if an heir runs into legal trouble ordevelops a drug problem. These problems may beknown to the client, unknown to the client, or theymay develop down the road. One alternative is tohave the personal representative sell the firearmsand distribute the proceeds to the donor.

3. Leaving firearms to worthy organizations: BothNRA and TSRA accept donations (and there areother worthy organizations). Both NRA and TSRAdo their best not to keep this a secret. Bothorganizations accept donations through the probateprocess - in other words, supporters can leavefirearms and other assets to NRA and TSRA in theirWills. There are worthy organizations associatedwith both NRA and TSRA, including:

< Texas State Rifle Association [501(c)(4)]

< Texas State Rifle Association Foundation,Inc.[501(c)(3)]

< National Rifle Association of America[501(c)(4)]

< NRA-ILA (Institute for Legislative Action)[501(c)(4)]

< The NRA Foundation, Inc. [501(c)(3)]

< The NRA Civil Rights Defense Fund[501(c)(3)]

< NRA Special Contribution Fund (WhittingtonCenter) [501(c)(3)]

< NRA Freedom Action Foundation [501(c)(3)]

Donations by an estate to a 501(c)(3) organization aretax-deductible to the estate, just as donations by a livingperson can be deducted from income. 26 U.S.C. § 2055(estate tax); 26 U.S.C. § 2522 (gift tax). This can havethe effect of protecting the estate from estate and gifttaxes. Donations to 501(c)(4) organizations are not tax-deductible.

Persons interested in donating to any of theseorganizations can contact TSRA directly, contactNRA’s Office of Advancement's Planned GivingDepartment at (877) NRA-GIVE, or email me atgenghis@healylaw.com.

ii. What Estate Planning Method Will BeUsed?

Once the client determines who will get the guns, he orshe must choose the method used to transfer them to thebeneficiary. There are at least four major options.

(1) Last Will and Testament.

Draft a “Last Will and Testament” and identify thepersons who will receive the firearms. This is thenormal method of distributing property upon death. Agift of firearms may be done using at least threedifferent methods:

1. A general gift - “I give all my firearms, ammunition,and shooting equipment to _____.”

2. Specific gifts of each firearm or piece of equipment- “I give my Colt 1911 semiautomatic pistol, serialnumber _____, along with its holster and magazinesand all of my .45 ACP ammunition, to _____.”

3. Through the residuary clause - “I give, devise andbequeath all of my estate of whatsoever kind andwheresoever situated to _____.”

Some gun owners go through their gun collections andleave specific guns to specific loved ones, in theirWills. This is a great concept, but it can cause problemsas guns are sold and new ones are acquired. Attorneysshould caution their estate planning clients to reviewand update their Wills from time to time.

The attorney must take steps to protect the client’sintentions, as in any estate planning matter. This

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includes accurately identifying and specifying theclient’s intentions; helping him or her choose anappropriate person to serve as personal representative;minimizing transactional costs by waiving formalitiessuch as a bond, and specifying independentadministration; avoiding taxes to the extent possible;including provisions to deter disputes, if appropriate;coordinating the estate plan with the client’s spouse’splan; and protecting the estate plan from will conteststo the extent possible.

(2) Trust.

It is also possible to place firearms or other assets in atrust. This method is described in great detail in the firstpart of this paper, but I will discuss the general concepthere.

A trust is an arrangement where a person (the settlor)gives one person (the trustee) ownership of property,but it is held for the benefit of another person (thebeneficiary). There can be multiple trustees andbeneficiaries, and the trust can authorize the settlor tochange them while the trust is in existence.

There are several types of trusts that can be used to holdand distribute guns and accessories:

1. Living Trusts: A living trust is one that is formedwhile the settlor is still living. Some persons placeall or most of their assets in a living trust, to avoidprobate. The settlor can appoint himself or herselfas trustee.

2. Testamentary Trusts: A testamentary trust is onethat is formed when the person dies. Normally thetrust is formed in accordance with provisions in theWill.

3. Gun Trusts: A gun trust is one whose primarypurpose is to hold firearms, ammunition, andaccessories. More and more gun owners are creatinggun trusts for the primary purpose of preservingtheir guns and accessories, and leaving them toloved ones who will cherish and appreciate them.

4. NFA Trusts: An NFA trust is one whose primarypurpose is to hold firearms regulated by theNational Firearms Act (machine guns, silencers orsuppressors, short-barreled rifles or shotguns,destructive devices, and "any other weapon"), andtheir accessories. One of the benefits of an NFAtrust is to allow the firearms to be possessed andused by other persons, by making them trustees.

If the client’s guns are held in a trust, they willgenerally not be a part of the estate, and they can bedistributed according to the terms of the trust.

At some point the trust will have to terminate anddistribute the property to the beneficiaries. The attorneyshould take special care to determine the client’sdesires, because this will be the ultimate distribution ofhis or her property.

(3) Inter Vivos Transfer.

The client has the right to give away his or her guns(and other property) while still alive. The downside ofthis method is that the client will no longer own thoseitems. If the client chooses this method, I recommendusing a Bill of Sale or other written document toprevent future arguments and document the decision togive those assets away.

(4) Intestate Succession.

This method should never be consciously chosen. It isincluded to help the practitioner who is faced with asituation where a gun owner died without a will.Intestate succession is the easiest method for lazypersons, but it makes it much more difficult for thoseleft behind. It is the default method that applies if noother arrangements are made. Simply do nothing, andlet your heirs sort it out.

It surprises most clients to know that if they do not havea Will, then you are stuck with the one which the TexasLegislature drafted more than fifty years ago. Ingeneral, the laws of descent and distribution are theLegislature’s attempt to guess what a person wouldwant done with his or her stuff, if you had taken thetime to write it down. These laws can be found in theTexas Estates Code, Chapter 201, here:

http://www.statutes.legis.state.tx.us/Docs/ES/htm/ES.201.htm

In general, the laws of descent and distribution try todistribute the person’s property to the surviving personswho are most closely related (spouse, children,children’s descendants, parents, siblings, siblings’descendants, etc.). A person who does not have a willshould read the law and decide if it distributes his or herproperty as desired. If not, that person needs a Last Willand Testament. One should also consider that the heirswill probably have to endure a lengthy and expensiveprocess of gathering and distributing your property,under direct Court supervision, if the person dieswithout a will.

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Intestate succession is an especially risky method oftransferring guns, for at least three reasons. First, withno Will, everyone is left to guess at the testator’sintentions. Second, with no executor or executrixchosen by the testator, the person in charge ofadministering the estate may not be the best person toknow and respect the testator’s intentions. Third,because the Court will have to appoint an executor,there will be a period of time when no one has thepower or duty to take possession of the firearms andstore them safely.

iii. Who Should Be in Charge?

It should go without saying that a person should ONLYappoint trustworthy people to handle his or her affairs.This includes your executor or trustee, and anyone elsewho will make decisions or take care of the client’saffairs.

It also makes sense to find out if your intended executor(or trustee, if you form a trust) is a prohibited person. Aprohibited person cannot possess firearms. A prohibitedperson probably cannot serve as executor of an estate(or trustee of a trust) which includes firearms orammunition. Because a person may later become aprohibited person, it may be wise to include provisionsin a will or trust to appoint a successor, if the initialappointee becomes a prohibited person. A trustee orexecutor of an estate owning firearms or ammunitionshould probably resign, if he or she is a prohibitedperson, or becomes one while serving.

Another potential problem is that the gun owner mayknow a lot about the law, but executors, trustees, andbeneficiaries may not. The attorney or client should talkwith each person before appointing him or her asexecutor, to make sure he or she is willing to serve. Theclient should also identify his or her major assets andwhere they are located, and identify your debts, to makethe executor’s job easier. A list of each would be veryhelpful. The client should also provide keys orcombinations to any locks, safes, or safe deposit boxes,and any passwords the executor will need to close outhis or her affairs. Someone should educate the trusteesand executors regarding the applicable gun laws,preferably in writing. The last thing a person wants isfor inheritance to result in a prison sentence for his orher loved ones.

iv. Drafting Concerns

A trust that owns Title II firearms must be drafted sothat it does not allow the trustees to violate the law. Itis even worse if it requires them to violate the law. The

same is generally true with regard to a Last Will andTestament. This could be legal malpractice and/or anethical violation, with serious consequences for theclient and attorney. A common example that will violatethe law is when the document directs trustees todistribute the Title II firearms on the death of the settlor(without requiring the ATF form to be submitted andapproved). If you have a gun trust that is not welldrafted, your trustees will have to sort this out andfigure out how to comply with the law, when the timecomes for the trust to terminate. This could result ininadvertent violations of the law.

v. Safe Storage.

At all times, guns and ammunition must be storedsafely, along with important legal documents. Thisapplies to the owner, the personal representative, and tothe heir. The reasons include both the need to preserveand protect the property, and the consequences that canoccur if firearms are stolen or made accessible to otherunauthorized persons.

Normal firearms and ammunition: All firearms andammunition must be stored where they are notaccessible to unauthorized persons. It is a crime underTexas law to allow a child to gain access to a readilydischargeable firearm. Texas Penal Code § 46.13. Evenif another state does not have a law explicitly requiringit, a person who allows unauthorized persons to haveaccess to guns and ammunition may be held civillyliable, and may also face criminal prosecution.Normally, this responsibility falls on the owner. Whenthe owner dies, the personal representative has theresponsibility of preserving and protecting the estate,which includes the duty to safely store guns andammunition. In particular, all firearms and ammunitionshould be stored so they are not accessible to minors. Ifyou have a receipt or bill of sale, or NFA documents,they should be stored with the same degree of care.

vi. Special Concerns with NFA Firearms.

The National Firearms Act regulates machine guns,silencers and suppressors, short-barreled rifles andshotguns, destructive devices, and “any other weapon.”This means that personal representatives and heirs musttake special care to educate themselves and complywith the law.

Even though the NFA was discussed in detail above,here is a summary of the general rules governing NFAfirearms:

1. Possession: The NFA makes it illegal for any

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person other than the registered owner to possess anNFA firearm. 26 U.S.C. § 5861. There is anexception for personal representatives during theterm of probate. 27 CFR 479.90a.

2. Form and transfer tax: The NFA requiressubmission of an application, payment of a tax, andapproval of the application before a Title II firearmcan be transferred (or made). 26 U.S.C. § 5811. Themost common forms include ATF Form 1 (to makean NFA firearm) and Form 4 (for transfer of anNFA firearm to a nondealer). The owner shouldstore the original NFA forms (with the tax stampaffixed) in a safe place such as a gun safe or safedeposit box. The owner should keep a copy of theATF form should be kept with each NFA firearm(including other items regulated by the NFA, suchas auto sears and suppressor parts). When thepersonal representative sees these forms, he or shewill realize these are special firearms that requirespecial care. It may not be immediately apparentthat a firearm is subject to the NFA (for instance, afully automatic M-16 looks the same at first glanceas a semiautomatic AR-15).

3. Tax-free transfer: In most cases, a transfer of anNFA firearm through inheritance or intestatesuccession is tax-free, using Form 5. This is becauseATF treats inheritance as a change in ownership byoperation of law, as opposed to a voluntary“transfer.” A transfer in probate is subject to the taxif the NFA firearm is transferred to someone otherthan a beneficiary (for instance, if the beneficiarywants the money instead of the gun).

4. Transporting NFA Firearms Between States: Whena person is appointed as personal representative andthe estate includes NFA firearms located outside hisor her state of residence, it may be necessary tosubmit Form 5320.20 and get it approved, beforetransporting the firearms back to the person’s homestate. ATF will require proof of the person’s statusas personal representative, which may includecopies of the Will, letters testamentary, or othercourt orders. Remember, Form 5320.20 is onlyrequired for interstate transportation of destructivedevices, machineguns, short-barreled rifles, andshort-barreled shotguns, but it may be advisable tosubmit it for suppressors and AOW’s.

5. Permissible owners: The NFA is a part of the TaxCode (Title 26 of the U.S. Code), which defines“person” to include trusts, corporations, and otherbusiness entities. Therefore they can legally make orown Title II firearms. ATF will not approve

applications for individuals to jointly own NFAfirearms.

6. State law: The law of each state may also restrictownership, possession, and use of guns, includingTitle II firearms. A person must comply with bothstate and federal law, to stay out of trouble.

January 4, 2016, the Attorney General signed ATFRegulation 41F (proposed as Regulation 41P). Itbecame effective on July 13, 2016. Here is a shortsummary of its major provisions:

1. Possession by personal representative: Thisregulation allows executors and administrators topossess NFA firearms owned by the estate “duringthe term of probate.” 27 CFR 479.90a.

2. Prior rules: In the past, ATF has publicly stated thatit allows executors and administrators to possessTitle II firearms on behalf of the decedent as long asthey transfer the firearms to the heirs within a“reasonable time.” This was a reasonable principle,but it was not a part of the U.S. Code or the Code ofFederal Regulations, so it did not have the force oflaw.

3. “Responsible persons”: The major change imposedby 41F is the new requirement for “responsiblepersons” of a trust or business entity to undergo abackground check as each ATF application isconsidered. “Responsible persons” generallyinclude anyone who has the right to makesignificant decisions regarding the NFA firearms,and anyone who has the right to possess NFAfirearms owned by the trust or business entity. 27CFR 479.63(b)(2) (“Making” an NFA firearm,Form 1); 27 CFR 479.85(b)(2) (Transferring anNFA firearm, Form 4).

4. Elimination of CLEO signature requirement:Regulation 41F also eliminated the old CLEOsignature requirement. In the past, ATF requiredeach individual applicant to obtain the signature ofa chief local law enforcement officer (“CLEO”) onATF applications. This was one of the factors whichresulted in the concept of the NFA trust, becauseATF did not require a CLEO signature on anapplication for a trust or business entity to make oracquire an NFA firearm.

5. New CLEO notification requirement: The oldCLEO signature requirement was replaced with aCLEO notification requirement. The definition of aCLEO now includes the local chief of police,

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county sheriff, head of the State police, or State orlocal district attorney or prosecutor. If an NFAfirearm is to be transferred to an individual, theexecutor will submit Form 5 to ATF (along withfingerprints and photographs of the transferee, andproof the person is the executor or administrator),and submit a copy to the CLEO having jurisdictionover the place where the transferee resides. If thetransferee is a trust or business entity, the executoror administrator will submit Form 5 to ATF (alongwith proof that he or she holds that position) and acompleted Form 5320.23 with fingerprints andphotographs for each “responsible person.” Theexecutor will also submit a copy of Form 5 to theCLEO where he or she resides. Each responsibleperson must submit Form 5320.23 to the CLEOhaving jurisdiction over the area where he or sheresides. 27 CFR 479.62(c) (Form 1); 27 CFR479.84(c) (Form 4).

vii. Recommended Steps for the Executorto Take.

Based on the legal principles discussed above, a personappointed as an executor or administrator should do thefollowing:

1. Education: It is especially important to ensure thatany executor or trustee becomes familiar with theapplicable gun laws. If you draft a will or trust, youshould make sure these people are educated aboutthese matters, in writing. It is preferable to leave anadvisory letter with the will or trust, so it is rightthere for the executor or trustee to review when thetime comes. A diligent executor will acquire thisknowledge before the testator dies.

2. Get help from a qualified attorney. I believe it isvirtually impossible for a layman to probate anestate without an attorney. The attorney’s fees aregenerally paid by the estate, not out of theexecutor’s pocket. Some wills allow the executor tobe paid “reasonable compensation” for his or herservices, and the expenses of handling the estate canalmost always be reimbursed by the estate. Thereare numerous methods of probating an estate,depending on the specific circumstances. Some ofthese are significantly more complicated andexpensive than others. An attorney can suggest thesimplest and least expensive alternative. Theexecutor can also incur some significant personalliability by mismanaging the estate or making othermistakes during this process. There are additionalrisks when the estate includes guns, so this must bediscussed in the initial consultation. The attorney

should advise the client of the applicable gun laws,and of any recent changes that affect the process.

3. Determine what laws apply.

a. Estate and all beneficiaries in Texas: If theestate is located in Texas (generally meaning thedecedent lived here until death) and if allbeneficiaries live in Texas, then this process willbe governed by federal law and Texas law.

b. Estate in Texas, at least one beneficiary inanother state: Texas law will probably governthe probate process. Texas law will govern thepossession and storage of firearms andammunition until they leave the state. The lawof the other state will govern possession andstorage of firearms, and other matters such asgun registration and prohibited types offirearms, when they are taken to the other state.

c. Estate in another state, at least one beneficiaryin Texas: The law of the other state will governthe probate process, and all matters involvingthe firearms until they are brought to Texas.You need to consult an attorney in the otherstate, and possibly one in Texas.

4. Perform your duties: The executor must carry outall legal duties with regard to the estate, as definedby applicable law and by the will.

5. Copy of will: Normally a person learns that he orshe has been appointed as executor, when thetestator provides a copy of the will. Hopefully theexecutor is familiar with the decedent’s, the assetsand debts, and where they are located. He or shewill also need the keys or combinations to any safesor locks, and any passwords. He or she will alsoneed a copy of any trust. Trust property will behandled separately, by the trustees instead of theexecutor.

6. Take possession of all firearms and ammunition(and all other property) owned by the estate:

a. The executor should identify all assets owned bythe estate, and take possession of them.

b. If firearms or other assets are held by a trust,they will generally not be considered to be apart of a decedent’s estate. Therefore, firearmsowned by a trust will continue to be governedby the terms of the trust, and will be unaffectedby the death of the settlor or the terms of his

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will.

c. Unload all guns and store them safely andsecurely - - preferably under lock and key.

d. Take photos or video to document the conditionof all firearms and accessories.

e. The executor must protect and preserve allassets, while probate is underway. This meanskeeping guns under lock and key.

f. The executor will need to make arrangements toget bills paid. This may or may not require acourt appearance to get the will probated andget “letters testamentary.”

7. Create an inventory of all firearms and othervaluable assets. This should include the make,model, caliber, and serial number of all firearms; adescription of any flaws or damage; a list of allaccessories such as scopes, holsters, magazines, andcases; and optimally, detailed photographs. Theexecutor needs to document their condition to provethat any damage or wear did not happen on his orher watch.

8. Evaluate the status of all firearms:

a. Normal guns: Try to locate receipts or invoicesshowing each gun was lawfully acquired.Additional steps must be taken if there is reasonto believe a gun was stolen, unlawful in someway, or otherwise subject to legal problems.

b. NFA firearms: These require special treatment.The first step is to identify all NFA firearms.This category includes machine guns (and partslike auto sears that can convert a gun to fullauto), suppressors (and parts), short-barreledrifles and shotguns, destructive devices, and“any other weapon.” It may not be immediatelyapparent that a gun is subject to the NFA. Lookfor selective fire switches. Measure the barrellength (for possible SBR’s and SBS’s) or bore(for possible DD’s) if there is a question.Consult a gunsmith if necessary. Locate theATF form with the tax stamp, if possible.

1) Unregistered or questionable NFA firearms:If the registration status of a Title II firearmis unclear (for instance, if the tax stampcannot be located), the ATF recommendsthat the personal representative contact theagency in writing and request verification

that it is properly registered to the decedent.The agency requires proof that the person isauthorized to act for the estate, becauseotherwise the law would prohibit disclosureof tax information. If the estate containsNFA firearms not registered to the decedent,they are considered contraband. In that case,ATF suggests that the personalrepresentative contact the agency to arrangefor their disposal. We hope the ATF wouldnot prosecute the executor under thesecircumstances.

9. Determine the value of each gun, if necessary. Thismay involve an expert opinion, or use of a booksuch as The Blue Book of Gun Values.

10. Determine who the heirs or beneficiaries are:

a. With a will: The executor and attorney shouldreview the will and determine how the firearmsand other assets will be distributed.

b. Without a will: The attorney should determinethe heirs using the laws of descent anddistribution (Texas Estates Code Chapter 201).

11. Determine if there are any beneficiaries who areprohibited persons: It is illegal for anyProhibited Person (felons and eight othercategories of people) to possess a firearm orammunition. This includes NFA firearms and“normal” guns. The executor may may want toask each beneficiary if he or she is a prohibitedperson, or conduct a background check. It is afelony to transfer a gun to a person, knowing orhaving reason to believe he or she is a convictedfelon. If this is the case, you must determinehow the estate may be distributed to complywith the gun laws, probate laws, and the will.This may involve selling some or all of thefirearms and distributing the proceeds to theheirs.

12. For NFA firearms, submit the proper form andobtain approval:

a. Transfers to beneficiaries: Submit Form 5 toATF (along with fingerprints and photographsof the transferee, and proof you are the executoror administrator), and submit a copy to theCLEO having jurisdiction over the place wherethe transferee resides. The firearm cannot belegally transferred until the form is approved.

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b. Transfer or sale to other persons: You will needto prepare and submit Form 4 to ATF, alongwith the transfer tax ($5.00 for each AOW,$200.00 for all others). Send notification to theCLEO having jurisdiction over the area wherethe person resides, when the application issubmitted to ATF. The firearm cannot belegally transferred until the form is approved.

13. Ensure any other legal requirements aresatisfied: This is more likely to be an issue if abeneficiary lives in another state, which mayrequire registration of some or all firearms, orissuance of a firearms owner’s identificationcard or similar credentials. The other state mayprohibit some types of guns or ammunition frombeing possessed in the state, or may prohibitcertain categories of people from possessingfirearms. It may also have laws governingtransportation and storage of firearms andammunition.

14. Distribute the guns to the beneficiaries. Youneed to alert the beneficiaries of any speciallegal requirements, especially with regard toNFA firearms. You must also ensure that theguns are legally transported to the other state. Ifyou personally deliver firearms or ammunition

to another state, you will have to comply withthe laws of all states through which you travel.If you fly with guns then deliver them, you willneed to comply with TSA regulations an theairline’s policy, as well as the law of thedestination state. If you ship them, you will haveto comply with the laws described above and thepolicies and procedures of the carrier.

15. File any final documents and close out theprobate case.

This is a general description of the probate process,based on independent administration. This process maybe significantly different, depending on yourcircumstances and the specific procedure being used.

d. Conclusion.

Gun ownership is very popular in Texas. Estateplanning attorneys must familiarize themselves with theapplicable gun laws, so their clients can make adequateplans. Estate planning attorneys can also help theirclients and expand their practices by understanding theprocess of drafting gun trusts. Probate litigators mustalso know and understand these laws, so they can keeptheir clients out of trouble.

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