January 01, 2018 GPSolo

REAL PROPERTY, TRUST, AND ESTATE LAW: Firearm Transfers for Estate and Probate Lawyers

This article provides basic information concerning how firearm transfers and estate planning and probate intersect.

Federal firearms control. Federal firearms law is divided into two Acts: the Gun Control Act and the National Firearms Act.

Gun Control Act (GCA) Law. These provisions form the backbone of the GCA: If an individual who is not a federal firearms licensee (FFL) wants to sell a firearm to an individual in another state, he or she must send the firearm to an FFL in the other state. For a non-FFL transferor, selling a firearm to a transferee in another state is not illegal, but the transfer must go through an FFL in the transferee’s state of residence, which will subject the transferee to a background check before releasing the firearm to him or her.

National Firearms Act (NFA) Law. Two sources of law are relevant for estate planning for NFA firearms. One is long-standing: the NFA Handbook of the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). The other is 20 C.F.R. § 479.90a, which codifies some of the practices from the NFA Handbook. The overarching concept is that the executor or other representative authorized by state law steps into the shoes of the decedent and may possess (but not use) an NFA firearm during the term of probate. The ATF does not consider the executor’s mere possession to be a transfer.

While the ATF will defer to state authority on how a particular estate is probated, it is best to provide as much documentation as possible in order to avoid unnecessary delays in transfer owing to requests for additional documentation. An executor must submit an application to transfer an NFA firearm by the close of probate. Executors may transfer the firearm to one of two classes: beneficiaries and other transferees.

Drafting concerns for estate planners. First, a bewildering array of guns are available for purchase. Often, the same model is produced by a number of different manufacturers. And even within one brand of firearm, there may be numerous models. Merely stating, “I give, devise, and bequeath my Glock 9mm to Beneficiary A” could create an ambiguity. If the testator owns a number of Glock pistols, this creates a latent ambiguity in the will. A solution, however, exists. A testator can identify the firearm by serial number in his or her will. Identifying the brand, model, and serial number will remove any latent ambiguities.

Second, while an executor might legally dispose of most other property in the estate, the executor may be unable to legally possess or transfer a firearm in his or her own capacity or in his or her capacity as executor. For example, restrictions are placed on the ability of convicted felons to ship, transport, or possess firearms or ammunition.

Whether an executor forbidden from possessing or selling firearms in his individual capacity may transfer a firearm owned by the decedent as executor is an unsettled question of law. In expressing the testator’s intent, drafters should prevent individuals forbidden from possessing a firearm under federal or state law from becoming the executor of an estate that includes firearms. Wills disposing of firearms should include a provision forbidding anyone from serving as an executor who is forbidden from owning or possessing firearms under either state or federal law.

NFA trusts. An NFA trust is a trust drafted under state law and specifically designed to hold NFA firearms. Similar to any other type of trust, NFA firearms placed in an NFA trust become nonprobate assets. The trust should consist of only NFA firearms. The most common feature of a well-drafted NFA trust is the sharp limitation of the trustee’s powers, particularly related to transferring NFA firearm. The trustee’s powers should be limited to selling, assigning, pledging, or otherwise transferring the NFA firearm only by following the ATF transfer process. The power to transfer the NFA firearms interstate should also be limited. The GCA prohibits the transfer of any destructive device, machine gun, short-barreled shotgun, or short-barreled rifle without using Form 20 to gain prior approval from the ATF. Trustees should be limited from transferring these items until ATF approval is obtained.

Revoking an NFA trust. Revocability is potentially a very serious issue. The transfer that occurs upon revocation can be dangerous. Revocation of an NFA trust is not automatically illegal. What makes the transfer illegal is failing to follow NFA transfer procedures before revoking. Settlors, however, may not think in these terms when revoking a trust, believing that the property belonged to them in the first place and they have the right to take it back at any time. This is not true. To guard against the potential of an illegal transfer upon revocation, two provisions should be included in a revocable NFA trust: one provision prohibiting settlor revocation without first obtaining approval from the ATF, and a second provision prohibiting any changes to the first.

The basics of firearm transfers. Intrastate transfer of firearms. Intrastate (within one state) transfers are often the simplest type of transfer; the only applicable laws are the state laws where the transfer takes place. However, the transfer process can vary hugely between states.

If a legal process exists, then the probate lawyer can assist the executor with it. But the absence of official regulations can leave the probate lawyer unsure about how to advise an executor. One option is to give the executor the ATF’s best practice manual for sales between state residents, available from its website. Another good practice would be to advise the executor to conduct the transfer through an in-state FFL. Estate planners can suggest including a provision in the testator’s will directing that such a transfer occur through an FFL and that the fee be charged against the estate to defray costs.

Interstate transfer of firearms. Three layers of law apply to an interstate transfer: the law of the state where the estate is probated, the GCA, and the law of the state where the beneficiary is located. These laws govern the contours of the transactions, but the actual transfers are form-driven.

Whenever an FFL transferor transfers a firearm to an unlicensed transferee, the FFL and transferee must jointly prepare an ATF Form 4473. Additionally, FFLs conduct a background check on the transferee through the National Instant Criminal Background Check System (NICS) system. Once the FFL receives a “proceed” order from the NICS, the FFL may complete the transfer, and the transferee immediately receives possession of the firearm.

Transfers under the NFA. If the gun being transferred is an NFA firearm, additional laws apply to the scenarios described above. NFA transfers typically take at least six months and should be initiated as soon as possible in the probate process. Of note, the NFA broadly defines the term “transfer” to include “selling, assigning, pledging, leasing, loaning, giving away, or otherwise disposing of” an NFA firearm. The NFA also states that there shall be a tax on all transfers. On the surface, this would appear to include transfers by estates. However, the ATF’s position is that an estate transfer is a “nonvoluntary” transfer, as it occurs by operation of law.

ABA SECTION OF REAL PROPERTY, TRUST & ESTATE LAW

This article is an abridged and edited version of one that originally appeared on page 505 of Real Property, Trust and Estate Law Journal, Winter 2017 (51:3).

For more information or to obtain a copy of the periodical in which the full article appears, please call the ABA Service Center at 800/285-2221.

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BOOKS AND OTHER RECENT PUBLICATIONS: Elder Law and Later-Life Legal Planning; An Estate Planner’s Guide to Buy-Sell Agreements for the Closely Held Business, 3d ed.; Leveraging Life Insurance Premium Payments; The German Inheritance and Gift Tax; Anatomy of a Mortgage: Understanding and Negotiating Commercial Real Estate Loans, 2d ed.; Hydraulic Fracturing: A Guide to Environmental and Real Property Issues.