New ATF Trust Regulation
ATF New Rule Change regarding Trusts and Corporations
(Effective July 13th, 2016)
The Department of Justice (ATF) has finalized a rule change which, affects all gun trusts and corporations which seek to acquire NFA items after the effective date of the change. The rule, once effective, would require notices to CLEO of submissions of Form 1’s and Form 4’s by trusts and corporations and also fingerprint cards, photos and background checks for all trustees and responsible officers. At present there are no such requirements. The proposed change set forth in 27 CRF 479 is to become effective July 13th, 2016.
Some of the reasoning behind the proposed rule change is to prevent prohibited persons, who are responsible persons in trusts or corporations, from obtaining NFA firearms and using them to commit violent crimes.
The rule change is not retroactive and will not affect NFA items purchased by trusts and corporations prior to the effective date of the change. In short, according to the Office of Management and Budget, until the rule change becomes effective, July 13th, 2016, NFA gun trusts and corporation will continue as they have in the past and will not be required to obtain CLEO signoffs, or have trustees or responsible persons submit photos, fingerprint cards and background checks for Form 1 and Form 4 transfers submitted to the ATF.
ATF RULE CHANGE REQUIRING Notice to CLEO ON TRUSTS Effective July 13th, 2016
On September 9, 2013 the Bureau of Alcohol, Tobacco, Firearms & Explosives (ATF) of the Department of Justice published a proposed change to its Rules concerning the requirements for entities submitting Form 1 and Form 4’s for approval. (Making or transferring NFA items such as machine guns, suppressors and short barreled rifles).
This proposed change known as Docket ATF 41F (27 CFR 479) was initially believed to go into effect in June of 2014, after the expiration of a public comment period. The effective date is now July 13th, 2016.
The final rule change: (1) adds a definition for the term “responsible person”; (2) requires each responsible person of a corporation, trust or legal entity to complete a specified form, and to submit photographs and fingerprints; and (3) Eliminates the requirements regarding the certificate of the chief law enforcement officer (CLEO), but requires notices to the CLEO instead.
At present and until July 13th, 2016, none of these proposed additional requirements for NFA transfers by trusts and corporations will be in effect. Trusts and corporations can still be used to acquire NFA items without the need for CLEO signoffs, background checks, fingerprint cards and photographs for each trustee, corporate officer or member.
NFA items registered solely in an individual’s name must be transferred and registered to the decedent’s heirs upon the death of the individual. Creating an NFA trust in which NFA items are registered avoids this problem. A well drafted gun trust will last several generations. It can serve to preserve and maintain a gun collection in the same entity.
Since NFA trusts are entities, any of their trustees can buy, sell or possess NFA items in or for the trust. In the case of individual ownership, the registered owner must be present at all times when his NFA item is being used by another person. This presents a problem when the owner wants to lend his machine gun or suppressor to someone else when he is out of town or the other person lives in another city.
With a well drawn gun trust, any trustee can use or possess the NFA items in the trust without the presence of the Grantor (maker of the trust). The trustee must be 21 years of age or over to comply with ATF regulations.
NFA trusts can also be formed by related or unrelated individuals in order to obtain machine guns and suppressors. Provisions can be made in the trust for those NFA items purchased by certain individuals to remain in their trusts after their deaths and to pass years later at the end of the trust to certain classes of persons such as children of their surviving relatives or specified third parties.
A gun trust is typically revocable trust which enables the grantor to make changes to the trust during his lifetime. This includes the power and right to add or remove trustees and beneficiaries. Typically, a grantor will amend the trust when grandchildren are born to include them as beneficiaries and trustees (upon reaching at least 21 years of age). In the case of married grantors whose bonds of matrimony end in divorce, the grantor can remove the former spouse as a trustee and beneficiary. Unfortunately, this type of gun trust amendment has become a frequent occurrence.
The ATF enlargement of the date for finalization of its Rule 41P now 41F (to July 13th, 2016), affecting the transfer requirements of trusts and corporations will provide an additional time window for the purchase of NFA without the proposed burdensome new requirements.
About the author: Martin Seidler is a San Antonio, Texas, attorney and class 3 enthusiast. He has practiced law for over 38 years and drafts NFA gun trusts for qualified Texas residents through his website: www.guntrustlawyer.net. He personally drafts each trust and customizes it to fit the individual needs of each client.