Yet another trust question

If those people are listed in the trust when it is submitted along with the Form 4, they will have to also provide fingerprints and photos or the Form 4 will be denied.

41F did not modify trusts or trust law... there is no such thing as pre-41f and post-41f trusts.

41F did change the rules for applications to make/transfer.

Well, the "post 41" world does mean that you could just buy the MG yourself, and it would not be part of any trust.

If you want to have the combined access a trust affords, then all parties have to agree to prints & photos. If some of the parties do not, you could form a new trust of those who were willing to participate, and go that route.

plodder said:

Comprende; well, kind of: I guess my choices are one of the following if I add another NFA item:
1. All trustees on current trust give me their fingerprints and photos for submission
2. Drop any trustees who do not wish to submit fingerprints and photo and continue with submission using current trust
3. Form a 2nd trust that includes only those trustees who would be interested in possessing the additional NFA item
4. File as an individual and deal with the complexities of having Trust NFA items and non-Trust NFA items.

Why oh why didn't I make this purchase last year?

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Modify number 2 to include adding back said trustees after the transfer is approved.

Modify number 3 to not immediately include the other parties until the transfer is approved.

It CAN be done so that 41f only ever requires one person to submit fingerprints/photos

why not consult with whoever wrote your trust?

I'm an "old timer" in the NFA game. I never did like trusts.

Trusts were originally a workaround for "non-signing" CLEO's. The multiple-party possession aspect was thought of later, and, frankly, (a) is a solution to a non-existent problem (when it comes to spousal possession), and (b) opens up a whole can of worms in itself. I, for one, do not want my multi-thousand dollar machine guns being passed around a group of people where I do not have immediate control. These are not items that you would want to casually lend out to people. And, in the event of your death, there's a simple tax-free transfer to your heirs using Form 5.

With the "non-signing" CLEO problem gone, I think you should seriously consider simple individual ownership.

If you have trustees who don't want to submit fingerprints and photographs, then as mentioned, you have two main options:

1. Create a new trust with a (slightly) different name and list yourself as the only trustee. Get the new stamp approved, then add everyone else.
2. Remove the other trustees from your current trust, get the new stamp approved, then add everyone else back.

As long as there are no other trustees at the time you apply for the stamp and continuing through when the stamp is approved, then you can add trustees later and no additional fingerprints or photographs are required. The only downside to the second option is that your current trustees won't be able to possess the current trust items for the time period that the tax stamp is pending.

I understand the folks who don't see the need for trusts and primarily see them as work-arounds for CLEOs that wouldn't sign. The spousal possession problem is truly mostly theoretical and not a practical issue that people have faced, but it is an actual legal problem that could someday arise. It may not be a reason to get a trust, alone, but a trust does provide some peace of mind on that issue. And, of course, if you don't loan out your NFA items, you won't see the need for a trust either. Personally, I only wish I could afford a machine gun. My best friend and hunting buddy is on my trust, and is able to be in sole possession of my silencers when we're out hunting and are separated. That's a good enough reason for a trust, for me.

There's one other benefit to a trust. Property in your will (you have a will, right? For the love of god, don't die without a will! It's a pain for your heirs!) has to go through a court-guided probate process. Property in a trust goes straight to the beneficiaries without having to get the court involved. I think for NFA firearms, it's easier not to have to explain the intricacies of NFA law to a court. They don't know it or understand it unless they happen to be stamp collectors, and I wouldn't want a valuable machine gun tied up in probate, at the whims of a court that doesn't understand machine guns (or that they're even legal to own).

Just my two cents as to why trusts can have value for some people. Of course, I do sell them to my clients, so I'm obviously biased. But I have one myself, and I think it's useful.

Aaron

Aaron Baker said:

There's one other benefit to a trust. Property in your will (you have a will, right? For the love of god, don't die without a will! It's a pain for your heirs!) has to go through a court-guided probate process. Property in a trust goes straight to the beneficiaries without having to get the court involved. I think for NFA firearms, it's easier not to have to explain the intricacies of NFA law to a court. They don't know it or understand it unless they happen to be stamp collectors, and I wouldn't want a valuable machine gun tied up in probate, at the whims of a court that doesn't understand machine guns (or that they're even legal to own).

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First of all, whether to have a will, or not, is a complicated issue. Depending on the family situation, having a will, and going through probate, could create more problems than it solves. There are alternatives, such as owning property jointly with right of survivorship, and naming beneficiaries in such things as bank accounts, brokerage accounts, pensions and annuities, insurance policies, etc. (All these things take the property outside the probate estate.) In the absence of a will (intestate succession), the state designates who is to inherit. If you are happy with the distribution specified by state law, then you are in about the same place whether you have a will, or not.

Wills have been known to destroy families, as heirs fight over whether each has received his or her "fair share." If the property passes through intestate succession, then all they can do is blame the state.

Regarding the issue of having NFA items go through probate, I think the biggest problem is that probated wills are public records. That is, the whole world would know about what items you possessed, and who the new owners are. (If a probate judge doesn't understand the intricacies of NFA law, what difference would it make? This would be between the executor and the ATF.) Anyway, if the NFA items passed under the residuary clause of the will, they wouldn't have to be specifically named. In processing a tax-free transfer to heirs on a Form 5, the ATF will accept either a probated will (whether it specifically lists the NFA items or whether they pass under the residuary clause), or an except from the state law that determines the heir under intestate succession.

I have seen a number of persons suggest that the route of creating a single-person trust for approval, then adding members to it.
And, it bothers me a bit.
Which is probably because I've not seen a lot of qualified trust attorneys weigh in to agree.
And more than a passing amount of experience with regulators. They usually go to great lengths to cover their bases,and seldom leave "easy outs" that "work around" the regulations.
I'd hate to see some one discover that, no, you cannot just play fast and loose with trust member ship in a sleight of hand, now you see'em, now you don't sort of way.
Could be entirely legit.
Might be a "well, we don't have time to drag you all off to gaol" thing.
Or could be, Do not Pass "Go" give us $10K and 10 years in federal prison, too.

As they say, straight from the horse's mouth:

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

Q: Will new responsible persons, added after the making or transfer, be subject to the same requirements?

A: Once an application has been approved, no documentation is required to be submitted to ATF when a new responsible person is added to a trust or legal entity. However, should a responsible person change after the application has been submitted, but before it is approved, the applicant or transferee must contact the NFA Branch for guidance.

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CapnMac said:

I have seen a number of persons suggest that the route of creating a single-person trust for approval, then adding members to it.
And, it bothers me a bit.

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You are right to be worried. Under trust law, there is something called the "merger doctrine." If the trustee and the beneficiary are the same person, their interests are "merged," the trust fails, and the property vests immediately in the beneficiary. So, more than one person has to be involved.

AlexanderA said:

You are right to be worried. Under trust law, there is something called the "merger doctrine." If the trustee and the beneficiary are the same person, their interests are "merged," the trust fails, and the property vests immediately in the beneficiary. So, more than one person has to be involved.

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I've only read up on trust law enough to keep myself cool with the ATF which leads to a question on what constitutes a responsible person with regard to 41F....

And since I'm not a lawyer that question was best answered by the Lawyer who wrote my trust (thats what I paid him for, right?).

https://johnpierceesq.com/who-is-a-responsible-person-under-41f/

The BLUF is that beneficiaries are not responsible persons, at least within the language of MY trust, and I dont have to photograph and fingerprint my 5 year old.

According to the ATF, a beneficiary could be a "responsible person," although that's unlikely for a 5 year old.

Here's what the ATF officially has to say:

https://www.atf.gov/rules-and-regul...cks-responsible-persons-effective-july-13#Who is a Responsible Person

If you draft your trust so that a beneficiary has the possibility of immediately possessing the weapon, that would make him a "responsible person" and require him to submit fingerprints, etc.

Whatever you do, don't name yourself as both the trustee and beneficiary, with no other parties involved.

Just a quick reply:

As someone else has already posted, the ATF is absolutely aware that you can add trustees after the approval of a tax stamp, and that those folks do not have to be fingerprinted or photographed. They actually solicited public comment during the 41F comment process regarding the feasibility of requiring newly-added trustees to submit fingerprints and photographs, but declined to promulgate any regulations pertaining to that.

So if you're worried about the ATF suddenly catching on to this "loophole," don't be. They're well aware of it, and don't object to the practice.

And for what it's worth, I am an attorney and I draft trusts for people, post-41F, that don't list any other trustees besides the grantor. But yes, as AlexanderA has pointed out, you do have to be aware of the doctrine of merger: basically, you can't be the (sole) beneficiary of your own trust.

AlexanderA is also correct that what the right answer is for any particular person when it comes to estate planning depends a lot on your family and circumstances.

Aaron

Flemming thought he was within the letter of the law when he washed out of state Form 4 commission transfers through the local Sheriff to turn 2-stamp transfers into 1-stamp transactions (his later fictional transfers through the DA's office without a physical custody changing hands are a different story). The former group was essentially tax planning.

My father made a living making buy or lease decisions on ax implications. Often millions of dollars of equipment or rights were swaped and the contract had a monetary value of $1 Tax planning seems to be OK for most things but not guns.

All this talk of adding and removing trustees makes me wonder if the ATF could make a fraud argument about something within the letter of the law (such as some but not all of Flemming's transfers).

Mike