United States Attorney General Loretta Lynch recently signed ATF 41P, the controversial regulations that change documentation requirements for firearms acquired and transferred with gun trusts. ATF 41P had been delayed a half dozen times over the past three years. After these delays and revisions, the final document includes important regulatory requirements that individuals using gun trusts for estate planning purposes should review.

Now that the proposed rule is signed, it’s final version ATF 41F takes effect in July 2016. A few items individuals with gun trusts and those planning to create gun trusts should know about ATF 41F:

  1. Responsible person definition. ATF 41F defines a ‘responsible person’ as one who has the ability ‘to exercise power or authority to direct the management and policies of the trust’ and also has ‘authority to receive’ a firearm for or on behalf of the trust. It remains to be seen, but it appears that under this definition, an individual who can possess trust assets, but who cannot control the management of the trust might not be subject to the rule. (Some speculation surrounds whether or not the rule could be avoided if a trust includes a special trustee with no authority over trust management who only serves to possess trust assets under discretion of a trustee.)
  2. Trust terms. The rule was not drafted with reference to proper trust terms. Although beneficiaries are no longer identified as ‘responsible persons,’ they will be considered responsible persons in situations where they meet the definition as described above. To ensure compliance, the powers of grantors, trustees, and co-trustees, as well as other parties and trust terms, should be reviewed with an attorney experienced in firearms law and estate planning.
  3. Exemptions. The new rule does not apply to pending applications. Fingerprinting and background checks will not be required if a trust had an approved application within the last two years as long as the trust had no change in structure. (However, the ATF’s interpretation of exemptions is being debated as of this writing. The public is awaiting an announcement regarding exempt applications.)
  4. Beneficiaries and tax. Later transfers of NFA items to beneficiaries as part of an estate may be tax-exempt.
  5. Paperwork. Trustees will likely experience a greater burden of documentation as a result of the new rule. Understanding compliance under the new rule might be confusing; a gun trust attorney can help to determine required paperwork and note important deadlines for ongoing maintenance.
  6. Background check requirements. When an item is transferred into a gun trust, background check information must be provided regarding all ‘responsible persons.’ A form letter noting the transfer must be sent to a CLEO as well. CLEO sign-off is not required.
  7. Effective date. The final rule goes into effect on July 13, 2016. (The final rule was signed by the Attorney General on January 4, 2016 and was published in the Federal Register on January 15, 2016.)
As always, regular reviews of one’s estate plan and assets can help to adjust plans to respond to important legislation changes. Schedule a review of gun trust documents to ensure legal matters are addressed and that loved ones are provided for properly.
By Attorney Katie Muhlenkamp