Is Your Healthcare Power of Attorney up to date?

News today bombards us with pandemic and hysteria about the latest coronavirus. So many thousands infected today. So many hundred died. I’d quote numbers, but by the time you read this they’ll be outdated.

The veracity of the pandemic aside, there is a simple lesson, among many, we can learn from this scare. Consider: If you were in the hospital unable to care for yourself, who do you want making decisions for you?

Power of Attorney

A power of attorney is a legal document that empowers another person to make decisions on your behalf. That power could be temporary or indefinite. It can be only while you are competent, only if you are not competent, or both. The power can be limited to one action, for all actions, or anywhere in between.

This is a powerful document that gives another the ability to conduct your business. It’s not something to be entered into lightly. There is, however, a place for these documents in everyone’s contingency plans, and I include such in all of the estate plans I help clients establish.

The Health Care Power of Attorney

A health care power of attorney is a specific power of attorney that governs only health care decisions. It allows your agent access to protected information about you and to make decisions about your care. It can also be used to limit what decisions they can make and to guide them.

Without one of these documents the law makes assumptions about who can make decisions for you and what decisions they can make. Your spouse gets first priority, but what if you never got an official marriage license? Adult children get second priority, but what if there is a disagreement among them? Parents come next, but do you want to burden your parents with life and death decisions over their child without first talking with them?

Planning Ahead

Today’s environment reminds us that there is no time like the present for planning. When we don’t even know if we can go to work the next day, it is nice to have something settled. If this situation has caused you to think about your health care decisions and / or your estate plan, I’ll be happy to help you put together some documents. From a full on estate plan to an emergency contingency plan to carry you the next year, I’m still available via phone and email, and maybe even face-to-face. Chairman McMaster allowing of course. . .

The Flexible Gun Trust

Clients commonly ask, “what are the chief benefits of a Gun Trust today.” With recent changes in NFA law requiring all purchasers to submit fingerprints and other documentation for a background check, the benefits are not as immediate as they used to be. However the longterm and most important benefits have remained the same. In a word: Flexibility.

Multiple Possession

A Gun Trust allows you, the creator, to list multiple people as Trustees. Any one of these persons can possess guns owned by the Trust and transact business on behalf of the Trust. This allows your spouse to have access to the firearm without committing an unintentional felony. And any good husband knows that keeping your wife out of jail is a fundamental necessity to a happy marriage!

Or you can allow a friend or youth (18 or over) to borrow your NFA firearms and use them without you present. The Trust thereby allows you to share your NFA firearms in a manner very similar to how you might share your other firearms. Not lightly, but with the right forethought to those you know are responsible.

In short, a Gun Trust gives you the flexibility to allow others to use your NFA firearms outside of your presence.

Adaptability

A Gun Trust is completely controlled by you, the creator. Life changes, and so can your Gun Trust. You can add or remove Trustees at any time. This is helpful to reflect the changes in life that come with time, such as marriage, divorce, the maturing of children, etc.

What we establish today is just the beginning, and you can change at your leisure who will be able to possess and use the firearms. This gives you the flexibility to adapt your Gun Trust to your current needs even as those needs change overtime.

Future Planning

A Gun Trust also clearly lays out what happens to the firearms in the future. Should anything happen to the Trustees, your Successor Trustees can step in and take care of the firearms and the Trust. But since these Successor Trustees have no current role, they are not subject to any ATF background check. Rather, they are waiting in the wings if needed, and until then are not involved with the operation of the Trust.

The Beneficiaries you name will receive the firearms owned by the Trust upon your passing. Like a will, this allows you to direct who inherits the firearms, but unlike a will, probate is not required. We can create multiple tiers of Beneficiaries to ensure that the firearms are passed down even if one of your Beneficiaries is deceased or not interested in the firearms.

Thus a Gun Trust gives you control over how the firearms are passed down, even if your first choice of a Beneficiary is not available.

Durability

A Gun Trust outlives you. Even after your death the firearms remain in your family and no transfer paperwork needs to be filed with the ATF until the Trust is terminated. With multiple beneficiaries, that may be multiple generations in the future. Therefore the gun remains owned by the Trust, and the Trustees and Beneficiaries can continue to enjoy ownership through the Trust.

Thus if your first Beneficiary takes no action with the firearms and instead ignores them, your second Beneficiary won’t have to explain that inaction to the ATF at a later date. The Trust provides flexibility to your Beneficiaries regarding when and how they claim the inheritance in the Trust.

Conclusion

These are some of the most important ways in which a Gun Trust can be of benefit when purchasing a NFA firearm. (Or when protecting a large collection of all types of guns.) Robert commonly helps clients in South Carolina create a Gun Trust to protect their collection, allow multiple possessors, and to pass down the collection. To get started on a Trust, or to learn how a Trust can specifically help you, contact Robert.

Who’s Your Responsible Person?

ATF 41F, the final implementation of ATF 41P, has raised many issues. None of them are more confusing or more important than who is a ‘Responsible Person’. The exact meaning of this term, or more importantly who is included, decides just how much paperwork a trust must submit for a transfer.

The Definition

For starters, consider the definition found in 27 CFR 479.11:

In the case of an unlicensed entity, including any trust, partnership, association, company (including any Limited Liability Company (LLC)), or corporation, any individual who possesses, directly or indirectly, the power or authority to direct the management and policies of the trust or entity to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust or legal entity.

The first sentence, which affects all entities, hinges on who has “the power or authority to direct the management and policies” of the entity as they relate to firearms. This is in keeping with the definition of responsible person for Federal Firearm Licensees and would exclude employees who cannot control a company.

This is a narrowing of the proposed definition which included any individual who possessed “the power or authority . . . to receive, posses, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust or entity.” (AG. Order No. 3608-2016, P. 16). Under the final rule, it appears at first brush that mere ability to possess a firearm is not the determiner of a ‘Responsible Person’.

The Extended Definition for Trusts

The ATF, feeling that a single, complicated, sentence was not enough, went ahead and ‘clarified’ further the definition as it relates to trusts.

In the case of a trust, those persons with the power or authority to direct the management and policies of the trust include any person who has the capability to exercise such power and possesses, directly or indirectly, the power or authority under any trust instrument, or under State law, to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust.

The meaning of this sentence is ambiguous at best. The operative word is the underlined “and” and how it is interpreted.

So Who Is Included?

Some have read the additional sentence specifically directed at trusts and interpreted the “and” as an “or” and concluded that anyone who can “receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust” is a ‘Responsible Person.’

Others have recognized that it is possible to have a lower class of trustees, much like lower level employees, who have the ability to possess firearms but do not have “the power or authority to direct the management and policies of the trust.” (This is exactly the position of “Possessory Trustees” in Firearm Collector Trusts drafted by R.K. Merting.)  Therefore, some argue, the definition as written does not include these individuals because they cannot both possess firearms AND control the management and policies.

When we look to the ATF’s response to comments to clarify the definition we find they waffle on their interpretation! In the draft of the final rule released by the Attorney General, AG Order No. 3608-2016, the ATF places emphasis on the “power and authority to direct the management and policies of the entity insofar as they pertain to firearms.” (P. 4. See also, P. 14, 32, 114, 124, 145, 210-11). However, at other points, the ATF places emphasis on “individuals with a trust or legal entity that will exercise control over NFA firearms” (P. 100) or are “able to control firearms” (P. 105). See also P. 177

This ambiguity in interpretation is best discussed on P. 118 of AG Order No. 3608-2016. Here ATF states clearly that ‘Responsible Persons’ “applies to those who possess the power or authority to direct the management and policies of an entity insofar at they pertain to firearms.” But, the ATF asserts that “Trusts differ from legal entities in that those possessing the trust property – trustees – are also the individuals who possess the power and authority to direct the management and policies of the trust insofar as they pertain to trust property, including firearms.” This single sentence appears as the lynchpin in the ATF’s reasoning that anyone who can possess a firearm in a trust can ergo control the management of the trust. However, trusts are complicated contracts that the settlor can draft with minute details and multiple roles: Thus this is not necessarily true.

The ATF further muddles their reasoning claiming that a beneficiary, who by definition has limited to no control over the trust, may be a “responsible person because of their capacity to control the management or disposition of a relevant firearm.” Here, the ability to appoint who receives a firearm could, arguably, require inclusion as a ‘Responsible Person.’

Unfortunately, I do not have a definitive answer on whether a special designed class of trustee, i.e. Possessory Trustees, can possess NFA firearms, not control the management and policies of the trust, and therefore not be a responsible person. I certainly see the logic in each argument, but I am inclined to believe “and” means “AND” and that the trust can be artfully drafted to create Possessory Trustees. Unfortunately, such an interpretation raises the question as to why the ATF included this sentence at all?

One answer to that question is to exclude “Trust Protectors” from the definition of “Responsible Persons.” A “Trust Protectors” is a person with high level checks on the trust and the trustees powers. In some instances, these people can guide the trust, remove trustees, and appoint trustees. However, Trust Protectors almost never have the power and authority to directly control the assets of the trust, and therefore they would not be able to “receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust.

However, the strict language does not exclude people who don’t meet the extended definition. Rather it only clarifies who is included. Therefore, it is again not clear that a person who does not meet the extended definition for a trust, but meets the basic definition for all entities, would not be included as a ‘Responsible Person.’

More Clarification!?!

Almost as in recognition of this confusion, the ATF continues their definition with examples of who is, and is not, a ‘Responsible Person.’

Examples of who may be considered a responsible person include settlors/grantors, trustees, partners, members, officers, directors, board members, or owners. An example of who may be excluded from this definition of responsible person is the beneficiary of a trust, if the beneficiary does not have the capability to exercise the powers or authorities enumerated in this section.

In the first sentence, it is noteworthy to point out that employees are not included. Certainly there are times when employees would be ‘Responsible Persons.’ However, there are many others when they would not. In most FFL applications, only the owner, and not the employees, are Responsible Persons. The ATF explicitly notes that beneficiaries are excluded where they do not have “the powers or authorities enumerated in this section.” This note of exclusion lends credence to the argument that not all trustees are automatically ‘Responsible Persons’ if it can be shown they do “not have the capability to exercise the powers or authorities enumerated in this section.

So, What’s a Man to Do?

Wait and see is the best advice of the day. We cannot submit applications under the new rule until July 13th, and I do not expect responses from applications submitted at that time until 2017. Therefore it could take a year or more to determine if a properly drafted trust will allow for ‘Possessory Trustees’ who can use the firearms but not guide the trust. Of course, the safe option is to submit ‘Responsible Person’ forms for every trustee, but I am sure somebody will want to push the issue to learn just who is a ‘Responsible Person’ when it comes to trustees. If that’s you, then we can discuss your Form 4 in private after July. Until then, avoid the whole issue and get your transfers submitted now!

Can I still get a gun trust?

After the recent Executive Order regarding the NFA, I have been asked many times: “Can I still set up a gun trust?”. You can, and the President alone cannot prevent you from doing this. He can only make buying a firearm more difficult for your trust.

Before July

Until July 13th, 2016 the current (i.e. old) rules are in effect. We can set up a trust and transfer your firearms into it with minimal paperwork. To use the old rules, your transfer application (Form 4) or making application (Form 1) must be postmarked by Tuesday July 12th, 2016. We do not suggest pushing off your purchase for this long, but if you do, be sure to send the paperwork via certified mail so you can prove when it was sent and received.

Submitting your paperwork before July 13th is a viable option for both existing trusts and any new trusts that are established.

July 13th and Beyond

Trusts will still be able to buy or make firearms (including suppressors) after July 12th, 2016. However, applications submitted on or after the 13th of July will require additional documentation. While this will not prevent you from acquiring new firearms, we certainly realize that the inconvenience may warrant going ahead and purchasing firearms prior to July 13th, 2016.

New Forms and Paperwork for Transfers

For all transfers on or after July 13th, including making applications, every “responsible person” (to be discussed in a later post) will have to submit:

  • a Form 23 including a 2″x2″ photograph of the “responsible person”; and
  • duplicate FBI Forms FD-258 fingerprint cards.

These documents on the “responsible persons” will be in addition to the Form 4 (or other appropriate form) and documentation necessary to show the existence of your trust.

The photographs must be taken within the past year and show the bare head of the “responsible person.” Essentially, these are the same style photographs used for passports, and any passport quality photographs should suffice.

The FBI Form FD-258 fingerprint cards are the same fingerprint cards used for the SC Concealed Weapons Permit. These can normally be acquired at a local police station, but many SC CWP instructors also complete these cards.

Chief Law Enforcement Officer Notification

Starting July 13th, 2016, the CLEO sign off will change to a CLEO Notification. Additionally, the requirement will be extended to every “responsible person” of the trust.

The Trust itself will have to send a copy of the Form 4 (or the Form 1 or Form 5; whichever the trust is filing with the ATF) to a CLEO for the address where the Trust intends to keep the firearm. (i.e. The location of the head Trustee or business office of the Trust.)

Each “responsible person” of the trust will have to send a copy of the Form 4 (or other appropriate form) and Form 23, including the photograph, to a CLEO for their residence.

The Two Year Rule

If your trust has submitted the paperwork above in the past two years, had a form approved, and not undergone any changes, it can skip the submittal of supporting documents and instruct the ATF to refer back to the earlier approved transfer or making application. You will have to certify that the information submitted has not changed.

Unfortunately, this exclusion does not clearly extend to the CLEO notification, and by all appearances a new notification will have to be submitted for every transfer or manufacturing application. I expect we will learn more on this as we go forward.

Conclusion

There is still plenty of time to set up a trust and begin the transfer or making of NFA firearms. Even after July 12th, 2016, your trust can acquire NFA firearms with just a bit more hassle. The two year rule minimizes this burden, but it appears the Form 23 will still have to be submitted to the local CLEO even though it is not required to be submitted to the ATF. At least there will be no requirement to take fingerprints for every purchase.

If you wish to get ahead of these new requirements, please contact Robert today to get your trust set up.

Firearm Collector Trust: A Legal Gun Safe

Gun trusts provide their owners with all sorts of benefits. The most well known relate to the purchase and possession of NFA firearms, such as eliminating the need for a CLEO sign off or allowing multiple people to possess firearms on behalf of the trust. However, there are many more benefits a gun owner can obtain by putting his general firearms collection into a trust. Like a gun safe, a Firearm Collector Trust protects your investments and keep them out of the wrong hands.

Benefits of a Firearm Collector Trust

Specific benefits of a Firearm Collector Trust include:

  • Privacy
  • Control over who receives firearms
  • Control over how and when firearms are passed down
  • Splitting of possession and ownership to protect firearms from confiscation in event a possessor loses his firearm rights
  • Elimination of unnecessary transfers (and thereby the need to comply with restrictions on transfers)
  • Safeguards designed to work around potential future legislation

Some of these benefits are applicable to everyone, and others depend on you and your family’s situation. Like a gun safe, you purchase a Firearm Collector Trust to provide protection for your guns based off of your risks. If you want to learn more about the situations where an all inclusive trust can help you, please enter your name and email below to receive a white paper on Firearm Collector Trusts or contact Robert.

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