By Johanna Reeves, Esq.
Estate transfers of firearms controlled under the National Firearms Act can be a maddening process, especially if the decedent’s family is unfamiliar with the federal controls over the transfer and possession of NFA firearms. In 2016, the Bureau of Alcohol, Tobacco, Firearms and Explosives attempted to clarify this process by amending its regulations in Part 479 of Title 27 of the Code of Federal Regulations. In Final Rule 41F, ATF added a new section specifying what executors or administrators of a decedent’s estate must do to lawfully dispose of an NFA-registered firearm. In this month’s column I’ll review the regulations governing estate transfers and common pitfalls to avoid when filing an application to transfer NFA firearms from an estate.
At this point I must highlight the importance of state law in estate transfers of NFA weapons. Central issues, such as whether a person has authority to act on behalf of an estate, or who are the beneficiaries entitled to a decedent’s property, are dependent on the laws of the state where the decedent resided. The laws vary among jurisdictions, so it’s well advised to consult with legal counsel who specializes in estate law in the state governing the estate.
Further, a person authorized under state law to dispose of property on behalf of an estate may have different titles, depending on the applicable law. Such a person may be referred to as “executor,” “administrator,” “representative,” or another title. For ease, this article uses the term “executor” but remember, the actual title of the authorized representative may be different, depending on the governing state law.
A. NFA Controls
The NFA, Title 26 of the U.S. Code, Chapter 53, regulates machineguns, short barrel rifles, short barrel shotguns, silencers, destructive devices, and certain other concealable firearms known as “any other weapon.” The NFA requires such firearms to be registered by their respective manufacturer, maker, or importer within a specified time frame (e.g., non-licensees must obtain ATF approval in advance of making an NFA firearm on a Form 1 application; qualified manufacturers must register NFA firearms manufactured by submitting a Form 2 notification to ATF by the close of the next business day following the date of manufacture; and qualified importers must register NFA firearms imported by submitting a Form 2 notification to ATF within 15 days of the date of import). Only registered NFA firearms may be transferred, and ATF will not approve late registrations.
B. ATF Rulemaking Governing Estate Transfers
As evidenced by long-standing public guidance, ATF historically has treated estate transfers of NFA firearms registered to a decedent differently from other transfers. Because of the temporary legal nature of estates and the fact that state probate laws govern the distribution of estate property, ATF has allowed executors to temporarily possess NFA firearms to effectuate lawful transfers on behalf of the estate. ATF does not register the firearm to the executor and allows the executor to sign the transfer applications as the Transferor on behalf of the decedent’s estate. Examples of ATF’s guidance on estate transfers include “Transfers of National Firearms Act Firearms in Decedents’ Estates” (Sept. 5, 1999, revised Feb. 23, 2006) and the National Firearms Act Handbook, ATF E-Publication 5320.8 (April 2009). Both are available at atf.gov.
On September 9, 2013, ATF proposed a rulemaking (ATF 41P) to codify its public guidance on the possession and transfer of firearms registered to a decedent. Specifically, ATF proposed adding a new section to the NFA implementing regulations at 27 CFR Part 479 to clarify that an executor may lawfully possess a firearm registered to a decedent during probate without ATF treating such possession as a “transfer” under the NFA. Further, the proposed rulemaking also specified that an estate transfer of a firearm to a beneficiary, such as an heir (named in the decedent’s will) or, absent a will, anyone entitled under state law to inherit the firearm would qualify for tax exempt status.
ATF finalized this rule on January 4, 2016 with no notable changes from the 2013 proposal. Interestingly, ATF declined to accept a comment requesting the rule governing estate transfers be extended to other involuntary transfers, such as with dissolution of a corporation, liquidation in bankruptcy, or forced transfers during divorce proceedings. The stated reason for rejecting the comment was purely discretion. “The Department has exercised its discretion to decline to expand the scope of the rulemaking to encompass involuntary transfers not addressed in the proposed rule. Should the Department determine that its position with regard to estates should be extended to other involuntary transfers, it will do so in a separate rulemaking.” 81 Fed. Reg. 2665 (Jan. 15, 2016). To date there have been no further efforts to expand the scope of the rulemaking.
The new rules, codified at 27 CFR § 479.90a, took effect on July 13, 2016. Even though they codify ATF’s policies toward estate transfers and clarify an executor’s ability to possess and transfer NFA firearms on behalf of a decedent’s estate, these dispositions can still be challenging.
II. The Transfer Application
There is never a guaranty ATF will approve an application to transfer an NFA weapon. But estate transfer applications can be even more complicated because of the myriad state law issues present in these transactions. To increase the likelihood ATF will approve an estate transfer application for an NFA firearm, it’s important to know the elements of the prospective transfer, namely the who, the what, and the where. Then, when it comes time to prepare the transfer application and assemble the submission package, care must be taken to include the necessary support documents.
A. Confirming the Elements of the Transfer
1. The Who – Is the Person Authorized to Act on Behalf of the Estate?
Whether ATF will approve an application to transfer an NFA firearm from an estate depends on the state law governing the estate. The burden is on the person signing the transfer application on behalf of the decedent to establish that he or she is legally authorized to dispose of the estate property.
The regulations specify the executor must identify the estate as the transferor and sign the application form on behalf of the decedent. The application packet must include documentation of the person’s appointment as executor, administrator, personal representative, or another authorized person.
In addition, the transfer application must be timely; the person signing the form must be authorized to represent an estate at the time the application is submitted. The regulations at section 479.09a(a) specify the executor must submit the transfer application “no later than the close of probate.” Estates are temporary legal entities created to dispose of a decedent’s property. The term during which an estate exists typically is defined by the laws of the state in which the decedent resided. But what if the NFA firearm is not discovered until after probate has closed? Such a scenario is not out of the realm of possibility, but then it’s incumbent on the executor to produce evidence, such as a court document, confirming the executor still has legal authority to dispose of property on behalf of the estate.
2. The What – Is the Firearm Transferrable?
The first challenge the executor faces is determining whether the subject firearm is registered to the decedent. If an NFA firearm is not registered to the decedent, the executor cannot register or transfer that firearm. Consequently, it is important at the outset to confirm the status of each NFA firearm belonging to a decedent. Sometimes, however, the executor may not be able to locate the decedent’s registration documents. Luckily, this does not mean that all hope is lost, but certain steps must be followed to confirm whether a firearm is registered to a decedent.
The NFA is part of the Internal Revenue Code. As such, a firearm’s registration information is considered tax information which the government is generally prohibited from disclosing except to the registrant or someone with legal authority to represent the registrant. In cases of an estate, ATF is permitted to confirm registration status to the executor. However, the request must include documents showing the executor’s authority under state law to represent the decedent’s estate and dispose of the decedent’s property (see below for more information).
Be forewarned, ATF will consider any unregistered NFA firearm as contraband. If an NFA firearm is not registered to the decedent, this status cannot be cured, and ATF will require such unregistered firearms to be abandoned to ATF.
In addition to the registration status, it is also important to know whether the subject firearm is unserviceable. ATF defines an unserviceable firearm in 479.11 as “[a] firearm which is incapable of discharging a shot by means of an explosive and incapable of being readily restored to a firing condition.” This is an important question because ATF regulations allow an unserviceable firearm to be transferred as a curio or ornament without payment of the transfer tax. This may affect the appropriate transfer application form to use. More on this shortly.
3. The Who – Who is the Transferee?
Recall that the NFA is part of the Internal Revenue Code and controls possession and transfer of the subject firearms through registration and tax requirements. Certain transfers qualify as tax exempt and are completed on the Form 5 application. If, however, the transfer is subject to the tax, the Form 4 application must be used. Using the wrong form will result in a return without action, so it is important to know whether the transfer is tax exempt or if it triggers the tax.
Beneficiaries of an estate qualify for a tax-exempt transfer and should be documented on the Form 5 application. Examples of a beneficiary include an “heir” (named in the decedent’s will), or someone entitled to inherit the property under the governing state laws. NFA firearms may be transferred interstate directly to a beneficiary of an estate. The beneficiary’s fingerprints must accompany the application form. If federal, state, or local law prohibits the beneficiary from receiving or possessing the firearm, ATF will not approve the application.
Transfers to unlicensed individuals outside the estate (i.e., not beneficiaries) are considered voluntary transfers and will require tax be paid on the Form 4 application ($5 for AOWs, $200 for all other NFA firearms). However, if the firearm is unserviceable, the Form 5 should be used and include an explanation of how the firearm was made unserviceable.
In addition, if the transfer is to be to a person outside the estate, the executor must show either that there are no beneficiaries of the estate or that the beneficiaries relinquish their rights to the firearm. This can be in the form of a signed and dated statement from each beneficiary.
D. The Where – Does the Transferee’s Jurisdiction Allow Receipt and Possession of the Firearm?
The location of the transferee is important because if state or local law prohibits the receipt or possession of the firearm in question, ATF will not approve the transfer. This rule applies to both beneficiaries and non-beneficiaries alike. For example, if the NFA firearm in question is a machinegun, it would behoove the executor to confirm whether the transferee is a resident of a locale that prohibits receipt or possession of machineguns.
In addition, when the transferee is a non-licensed individual outside the estate, ATF will not approve a Form 4 for interstate transfers, so the transferee must reside in the same state as the estate.
B. Checklist for Preparing the Transfer Application
- Identify the firearms subject to NFA controls. Are the firearms registered to the decedent?
- Are the subject firearms unserviceable? If so, gather documentation explaining how the firearm was rendered unserviceable.
- Is the person who will be signing the transfer form on behalf of the estate duly authorized to act in this capacity? Gather the documentation showing the person’s appointment as executor, administrator, personal representative, etc.
- Is probate still open? If not, obtain documentation showing the transfer is permissible under state law governing estates.
- Identify the transferee and determine whether the transferee is a beneficiary or is outside the estate:
- If the transferee is a beneficiary (the transferee is identified in the decedent’s will or entitled to inherit under state laws), obtain a copy of the will or other documentation showing the beneficiary status.
- If the transferee is outside the estate (i.e., not a beneficiary), obtain documentation showing either no beneficiaries or that the beneficiaries relinquish rights to the firearms.
- Prepare the transfer application form applicable for the type of transfer:
- Form 5 tax exempt (to beneficiaries, or of an unserviceable firearm). Interstate transfers permitted. Transferee’s fingerprints required.
- Form 4 tax paid (to non-licensed individuals outside the estate). Interstate transfers not permitted; transfer must go through FFL in transferee’s state. Transferee’s fingerprints and law enforcement certification required.
- Include the support documentation required under 27 CFR § 479.90a:
- Documentation of the person’s appointment as executor, administrator, personal representative, or as an authorized person;
- Copy of the decedent’s death certificate;
- Copy of the will (if any);
- Other evidence of the person’s authority to dispose of property in the estate (especially important if probate is closed); and
- Documentation relating to or affecting the disposition of firearms from the estate (e.g., a beneficiary’s relinquishment of rights).
***The information contained in this article is for general informational and educational purposes only and is not intended to be construed or used as legal advice or as legal opinion. You should not rely or act on any information contained in this article without first seeking the advice of an attorney.
ABOUT THE AUTHOR
Johanna Reeves is the founding partner of the law firm Reeves & Dola, LLP in Washington, DC. For more than 17 years she has dedicated her law practice to advising and representing U.S. companies on compliance matters arising under the federal firearms laws and U.S. export controls. Since 2016, Johanna has served as a member of the U.S. Department of State’s Defense Trade Advisory Group. From 2011 through 2020, Johanna served as executive director for the Firearms and Ammunition Import/Export Roundtable Trade Group and she continues to serve in an advisory role. Johanna can be reached at email@example.com or 202-715-9941.
|This article first appeared in Small Arms Review V26N2 (February 2022)