NFA Gun Trusts and Estate Planning Under Texas Law

EDITOR’S NOTE:

Among the property owned by many estates are guns. Guns are, of course, regulated by various government authorities, including the Federal government and the State of Texas. This blog post discusses an NFA gun trust and issues surrounding any estate that contains guns as properties. If you or a loved one has an estate with guns, please reach out to an attorney to discuss an NFA gun trust, as no two estates are exactly the same.

Gun Trusts Under Texas Law

Photo credit: www.davidbaxendale.com via Foter.com / CC BY-ND

Planning and Administration of Estates with Firearms

Federal statutes and regulations limit access to and ownership of certain firearms, and restrict the transfer (by sale, trade, gift, or estate distribution) of permissible weapons. Generally, weapons are broken down into two categories:

• Title I weapons
Title I refers to Title I of the Gun Control Act of 1968, and primarily includes common rifles, shotguns, and handguns, as well as other non-firearm weapons (tomahawks, spears, mace, nightsticks, etc.).
• Title II weapons
Title II refers to Title II of the Gun Control Act of 1968, known as the National Firearms Act (NFA), and includes shotguns with a barrel (or barrels) of less than 18 inches or an overall length less than 26 inches, rifles with a barrel (or barrels) of less than 16 inches or an overall length of less than 26 inches, machine guns (fully automatic guns), suppressors, and many other weapons.

Whether you own Title I or Title II weapons, or are the executor or guardian of an estate including Title I or Title II weapons, you need to be aware of the legal issues you may face.

Generally speaking, possession and transfer of Title I weapons is not heavily regulated in Texas. There are no special planning considerations, other than ensuring that the nominated fiduciaries and named beneficiaries of the estate are legally allowed to own or possess the weapon. An executor or guardian must be eligible to possess weapons in order to administer the estate. Since executors and guardians cannot be convicted felons, this should not present a problem. Executors, however, need to be careful not to transfer or distribute any weapons to persons who are not legally allowed to own or possess the weapon. The best practice is for the executor to use the services of a person with a Federal Firearms License (FFL) who can serve as a transfer agent to ensure the legality of the transfer. With a fee of $30-$50 per transfer, this can be cheap insurance.

Title II firearms, however, present significant issues, and impose harsh penalties for noncompliance (up to 10 years in federal prison and fines of up to $10,000). The Secretary of Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) maintains a registry of all Title II (NFA) weapons. For each NFA weapon a person wishes to purchase or possess, the person must apply for registration with the ATF and pay applicable fees and taxes to the IRS. If the weapon is not registered to a person BEFORE the person takes possession, the transferor and transferee are in violation of federal law. Recent changes in the law allow an executor to possess Title II weapons during the administration of the estate without it being considered a “transfer.” The application for an individual:

1. Identifies transferor and transferee by name, address, and Federal Firearms License (FFL) number;
2. Identifies the weapon to be transferred by make, model, serial number;
3. Includes a photograph and fingerprints of the transferee;
4. Requires a notice to be sent to the Chief Law Enforcement Officer (CLEO) of the city or county in which the transferee resides so that the CLEO may notify the ATF of any concerns he/she may have with the transfer

So, what does a “gun trust” do? It allows an NFA weapon to be possessed by and transferred not between individuals, but among the Trustees and other “responsible persons” of the trust without having to get permission and pay taxes at every change of possession. The application for a trust:

1. Identifies transferor and transferee by name, address, and Federal Firearms License (FFL) number;
2. Identifies the weapon to be transferred by make, model, serial number;
3. Requires a notice to be sent to the Chief Law Enforcement Officer of the city or county in which the transferee resides;
4. Identifies the primary location of the firearm;
5. Includes documentation proving the existence of the trust;
6. Includes a completed ATF From 5320.23 for each “responsible person,” including photographs and fingerprints, “Responsible person” is defined as any individual who has the authority to direct the management and policies of the trust to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust. Examples of who may be considered a responsible person include settlors/grantors, trustees, and beneficiaries.

Using a gun trust can simplify the handling, use, and enjoyment of the weapon. But, other rules still apply: you cannot cross state lines with the weapon without ATF permission, you cannot loan the weapon to anyone, changes in a responsible person’s eligibility to own or possess a weapon must be reported.
An executor, when distributing a Title II weapon, must follow the application process for each weapon. He should be sure that the transfer is authorized BEFORE he allows the beneficiary to take possession of the weapon.

EDITOR’S SUMMARY

In this blog post, we have discussed some of the issues surrounding gun ownership in the context of estate planning and administration. It is not uncommon in Texas for an estate to have guns, and for an inheritance to proceed with guns as property. Gun ownership, of course, is regulated and in any estate planning or estate administration you want to be in compliance with Federal and Texas state law. If you have inheritance or estate issues that may be impacted by gun ownership, reach out to one of our Dallas-based attorneys for a consultation. We also offices located in both Plano and Dallas for your convenience.

 


Photo credit: www.davidbaxendale.com via Foter.com / CC BY-ND