The March/April 2023 edition of the bimonthly magazine “California Firing Line”, published by the California Rifle & Pistol Association (CRPA), includes an “Information Bulletin” at pages 19-24 entitled Firearm Estate Planning — “Gun Trusts” which, rife with errors, wrongly disparages gun trusts. To protect CRPA members and readers, the bulletin must be retracted and readers must be provided with correct information.
It looks like CRPA is no longer uploading back issues, but you can see my scan of the bulletin here.
The bulletin appears to be largely an excerpt from the 2023 edition of “California Gun Laws” by Michel & Cubeiro of Michel & Associates, P.C. In February of this year I posted an article critiquing that book in regard to its discussion on estate planning. Only recently did I discover the erroneous magazine bulletin.
The bulletin’s discussion of relevant firearm laws is mostly correct. The authors are reasonably thorough in listing per PC 16960 the persons exempt from needing a dealer license while acting pursuant to operation of law (though they switched the order of a couple of them).
However in an apparent attempt to simplify, they give a shoddy description of PC 16990, which lists persons exempt from having to go through a licensed dealer when they are taking title or possession of a firearm by operation of law. First they say that the PC 16990 list includes all of those listed under PC 16960. Okay so far. But then they say there are four additional categories of persons, and that’s where we need to take a closer look:
- “A firearm passing to a surviving spouse.” The problem with this is that the exemption applies specifically to spouses taking under a spousal property petition pursuant to Probate Code section 13500 et seq. The overly broad language may harm a reader acting on it.
- “The transfer of a firearm by a law enforcement agency to the person who found the firearm where the delivery is to the person as the finder of the firearm.” No problem here, except the identical exemption appears in PC 16960, so there are only three additional exemptions, not four.
- “A firearm passed to a decedent’s successor.” The problem with this is that the exemption applies specifically to a firearm passed to a successor under a small estate affidavit pursuant to Probate Code section 13000 et seq. Again, the overly broad language may harm a reader acting on it.
- “The trustee of a trust.” Again, this phrase appears nowhere in these code sections, and the oversimplification can lead to confusion and harm. [For example, in their book (2023, 2022, and perhaps earlier versions I did not review) the authors use this same short phrase to describe several quite different exemptions in their separate discussions of PC § 31700(b)(7, 11) and PC 27920(b). In reality, PC § 31700(b)(7, 11), concerning exemption from Firearm Safety Certificate requirement, exempts testamentary trusts and court-supervised trusts (but not other living trusts); and PC 27920(b), concerning importation upon bequest or intestate succession, exempts only testamentary trusts. The third way their book uses the same short phrase is the way in which they use it in their bulletin for the actual clause we are discussing here, PC 16990(q), which is critically important in allowing California gun trust planning because it exempts all trusts which are neither testamentary trusts nor court-supervised trusts, both of which are already exempt under PC 16960(j,n) and PC 16990(k,p).] Perhaps a better way of describing this “additional” exempt person under PC 16990(q) is: “trustee of a living trust which is not court-supervised”. I realize the authors were trying to make things simple, but that can be a problem, especially where the authors use that same phrase “trustee of a trust” in their book with multiple, conflicting meanings.
The above errors are significant but the real danger of this bulletin is the misapplication of firearm law to poorly understood estate planning concepts. Apparently lacking any functional understanding of estate planning tools and estate planning goals, the authors wrongly conclude that “California’s firearm transfer requirements are a practical bar to the creation of a trust where the firearms are to be transferred to the trust itself” and appear to steer the reader toward non-trust solutions for gun planning, including for example, donation of the guns directly to CRPA. While the authors state that their bulletin Firearm Estate Planning — “Gun Trusts” does not go into detail on estate planning and warn the reader to consult an estate planning attorney, it does in fact advise on estate planning, and the advice it gives is bad for gun owners, their families, and their republic.
While it is true that “gun trusts” can be drafted either for National Firearms Act (NFA) firearms, or for non-NFA (regular, common) firearms, I rarely draft NFA trusts for California clients. This is because of changes in law and because of changes in the market for NFA items allowed in California (non-NFA bullpups are now a popular alternative to AOW). While NFA trusts can also allow non-NFA firearms, the planning for these two very different types of property is best kept separate. For clients in Washington and Texas, I will occasionally draft separate, standalone NFA trusts for suppressors and other NFA items, but even in those states the vast majority of gun trusts I draft are strictly non-NFA and typically I customize the client’s main revocable trust for this purpose, rather than setting up a standalone gun trust.
NFA trusts are still possible in California, but rarely worth the expense. California NFA owners should definitely stay away from cheap NFA trusts found on the internet or obtained free from gun dealers. Compliance with both federal and state law is necessary.
TRUSTS ARE NOT ENTITIES
The authors incorrectly state on page 23 that a trust is a “legal entity”. In the gun planning context, that is only true with an NFA trust, because trusts are defined as entities under the National Firearms Act. But even with an NFA trust, it’s only half true, because you must comply with state law as well as federal, and in California at least, trusts are definitely not entities, not even an NFA trust to the extent it must comply with California law. Actually it’s not even half true, because federal compliance also means Title I of the Gun Control Act, in addition to NFA (Title II), and under Title I (GCA) trusts are not entities. So in complying with these other regimes, the trustee will simply act as a normal trustee of a trust, holding title in the trustee’s own name and dealing with the firearm individually as such, though still bound as trustee under terms of trust. In California, as in the vast majority of states, a trust is simply a fiduciary arrangement where the fiduciary (trustee) agrees to follow terms of a trust created by a settlor to benefit a beneficiary. For convenience we often speak loosely of a trust as if it were an entity, usually in the context of funding, but a trust is not actually an entity in California. There are trusts that are statutorily defined as entities (as under NFA), and there are trusts that are treated like entities for certain purposes even if they are not actually entities (e.g., tax treatment of some irrevocable trusts; business trusts, etc.), but apart from NFA these distinctions are rarely relevant for gun planning.
As a result of this misunderstanding, the authors seem to be fixated on the fact that there is no way under California law to transfer a firearm into the name of a trust as if it were a named entity, as is done with ATF under NFA. On the contrary, since trusts are not entities in California, the only way to take title is in the name of the trustee. While for clarity it is good practice generally to indicate capacity as trustee in any title record, as is done routinely on deeds, accounts, and so forth, this is not a strict requirement and is often not even possible, for example with household furnishings, bullion, or bearer bonds. Best practice is to document the trustee’s capacity by executing a written assignment of the firearm from the trustee individually to the trustee as trustee of the trust, as you would for any other tangible personal property. That is all that is required in California, and there are various ways to accomplish this result (language in the trust, separate written assignment, or even court motion if necessary). Even as to items which normally have a title record of some sort (real estate, bank accounts), trust instruments often expressly authorize trustees to have these items held in the trustee’s individual name (without indicating capacity as trustee), or by nominees of the trustee, or by agents under a power of attorney, to be appointed by the trustee.
Nor is it a problem that only a single trustee owns the firearm, even where there are multiple trustees. One trustee can hold the firearm, or an independent special trustee can be appointed either by the trustees, or a trust protector, or a court. There is no furcation of trustee rights and duties in such a case because only one trustee has title and possession of the firearm. [This option can also be useful if the named successor trustee is not a California resident or not a natural person, because under PC 16990(q) the successor trustee MUST be a natural person residing in California; an independent special trustee can be appointed to accomplish transfer on death without probate, and then a dealer can be used if necessary to make further transfers.]
Therefore, much of the following statement on page 23 is incorrect [empasis added]:
In other words, although California law does not expressly prohibit the transfer of a firearm to a trust, and arguably even contemplates such transfers in certain respects, the procedural requirements placed on a CFD [dealer] generally preclude such transfers from taking place. This means the firearm can only be transferred to a single trustee, and only in a personal capacity. Any subsequent transfer to a beneficiary will require another transfer in accordance with all applicable laws. Given California’s restrictions on certain firearms such as “assault weapons”, subsequent transfers to a beneficiary may be difficult or even flatly prohibited.
As we saw in the discussion of PC 16990 above, California law certainly contemplates such transfers. The changes recently made to PC 16990 under AB 1292 removed all doubt of this, and there is nothing to argue on this point. If a successor trustee of a revocable (living) trust receives a firearm by so-called “operation of law” under PC 16990(q), how was that revocable trust created? Certainly not by operation of law! A real, live person bought a gun at a dealer and assigned it to his trust. Again, trustees often hold trust property in their individual names without disclosing capacity as trustee, and sometimes that is the only way they can hold formal title. How title is held formally does not always determine whether the property is held in the capacity of trustee. There are other ways to demonstrate that intent. Yet the authors incorrectly state that, at a dealer, a firearm can only be transferred to the trustee in a personal capacity.
Fortunately, this is not at all an issue for taking under PC 16990(q). CA-DOJ’s “oplaw” form (BOF-4544A, Report of Operation of Law or Intra-Familial Firearm Transaction), which must be filed within 30 days by any recipient using one of these operation of law exemptions, does indeed allow indication of capacity of trustee in acquiring the firearm.
Yet even here (still on page 23) the authors get so much wrong. First they get the form number wrong, calling it BOF-4522A which does not appear to exist. Then they incorrectly state: “Clearly, this form cannot be submitted on behalf of a trust itself.” Back in law school, I was taught that the word “clearly” is often the sign of a weak argument. Again, trusts are not entities. They are fiduciary arrangements. Everything the trustee does in this transaction is on behalf of the trust, even if the government fails to provide a way to disclose that capacity. But in the case of this oplaw form, it actually does allow you to use an “other” field to state that you acquired the firearm in your capacity as trustee.
The authors do have a point in that the oplaw form cannot be used with assault weapons. And filing the oplaw form is required at death for there to be a valid transfer to a successor trustee, or for intra-familial transfer or other oplaw alternatives such as small estate affidavit (or at incapacity, successor trustee or agent under power of attorney). If these laws are still on the books, i.e. not ruled unconstitutional by then, perhaps features can be changed so that the firearm is no longer an “assault weapon”. This may be as simple as separating upper from lower. If it is registered or there is no way to change the weapon’s status so that it is no longer an assault weapon, then probate may be necessary to transfer the weapon and in any event, it will probably be necessary to transfer it out of state. The assault weapon could be surrendered, if the other alternatives are not worth pursuing. Laws regarding so-called “assault weapons” change frequently and there is always some uncertainty in planning for them, but that is not an argument against gun trust planning. You plan to avoid probate as much as possible and maximize other benefits of trust planning, but occasionally probate is unavoidable as to certain assets. If you own an “assault weapon” and there is no way to change its status so it is no longer an “assault weapon”, it may be a good idea at some point to get it out of California while you still have capacity to do so. (Your trust can hold the rifle out of state, and make it available to beneficiaries for training.)
Note that near the top of page 24 the authors discuss a situation where “the firearm was already transferred to the beneficiary in their capacity as trustee“. They appear to use “capacity” here to refer to actual capacity, and elsewhere they use “capacity” to refer to how the name is listed, i.e., whether capacity is disclosed. This paragraph discusses the situation where a beneficiary-trustee decides to own the firearm individually, free of trust. The authors incorrectly state that such a change would “likely create no real benefit” as the trustee would already be in possession of the firearm so this would not be considered a transfer. There are actually a number of situations where the beneficiary may want to do this. For example, the beneficiary may want to resign from trusteeship in order to strengthen asset protection, possibly even move the trust out of state, but may want to retain all control and use of the firearm. Or consider another example, where the beneficiary is trustee of his own beneficiary-controlled trust which, for stronger asset protection, also has an independent “distribution trustee” through whom all distributions must be made. This may be an impermissible bifurcation of trustee powers with respect to the firearm and the beneficiary may want to hold the firearm free of trust unless the terms exclude firearms from the ambit of distribution trustee’s control.
There is a trend in academia to promote the entity theory of trusts. My guess is they would like to regulate private American trusts the way corporations and LLC’s are regulated, the way trusts are often regulated in Europe, even in the UK. American trusts are one of the last bastions of freedom because they are not entities but fiduciary arrangements (mostly among friends and family). That is the law in the vast majority of states. Last time I checked, there were only one or two states defining trusts as legal entities.
The authors errantly conclude by stating [emphasis added]:
The complex requirements of California’s firearm transfer requirements appear to act as a practical bar to the creation of a trust where the firearms are to be transferred to the trust itself. This leaves California gun owners with the options (sic) of creating a will or other estate planning document that dictate (sic) how their firearm collection should be handled upon their passing. While a trust may have some other benefit to a California gun owner, any such benefit should be discussed with an attorney knowledgeable in the laws as applied to wills and trusts.
PC 16990 and related sections are no more complicated than any other estate planning, and that’s exactly what they are — estate planning. In fact, these requirements are not any sort of bar to funding a trust with firearms. On the contrary, recent changes to PC 16990 eliminated much of the uncertainty over funding trusts with firearms. The authors appear to lack a solid grounding in estate planning and thus misapply their understanding of firearms law to a distorted view of estate planning tools and estate planning goals. Although the exact meaning of their concluding words is somewhat difficult to decipher, the authors definitely seem to be advising the reader to steer clear of trust planning for disposition of firearms, even if that would necessitate probate or the other shortfalls of non-trust planning. And the authors do not seem to understand the goals of estate planning for gun owners which stretch beyond merely avoiding probate, or donating guns to CRPA.
SOME HISTORY & BACKGROUND
TRUST TRANSFERS ARE NOT ACTUALLY BY OPERATION OF LAW
This is an important concept to understand: Trust transfers are not generally deemed to be transfers by operation of law.
Trust law is akin to contract law. The language of trust instruments generally controls what happens, and what the rights and obligations are under the trust instrument. There is a line of title insurance cases, for example, which has long held that while an executor or personal representative becomes a fiduciary upon operation of law, a successor trustee of a revocable (i.e., living) trust is not determined by operation of law. Instead, the trust instrument determines the successor trustee. This is why you should consider getting title insurance that covers successor trustees; older forms merely cover fiduciaries succeeding by operation of law.
OLD PC 16990 (prior to AB 1292)
Before AB 1292, PC 16990 had no express exemption for trustees of a living trust. There was a “but not limited to” clause under which some felt trusts could be shoehorned. But my understanding of the title insurance cases sapped any enthusiasm for that argument — there was no history of treating trust transfers as occurring by operation of law.
Without exemption from the requirement of going through a dealer, other than through probate there was no way to get title of a firearm from a decedent to a successor trustee. Dealer transfers require both parties to be alive, though some would use the inappropriate and illegal fiction called “slow PPT” (industry version of the movie Weekend at Bernie’s). So for several years I planned for guns using will, memo for tangible property, and in some cases a gun trust that would be funded by the will. I figured judicial economy was a good argument for using small estate affidavits, but there was no clear authority for doing so.
AB 1292 & NEW PC 16990
The passage of AB 1292 in July of 2019 greatly clarified many issues regarding use of specific tools for gun planning, such as powers of attorney, small estate affidavits, spousal property petitions, transmutations, and of course trusts.
As noted above, trustees are generally deemed to take property under the trust instrument itself, not by operation of law. PC 16990(q) statutorily changed that for firearm transfers. In Christian lingo, it “conquered death” and paradoxically, putting successor trustees under the “operation of law” umbrella actually operates to avoid probate and conservatorship.
Now, you can plan to have succession of trustee for firearms at incapacity and/or death, and depending on the circumstances and where the trustees are located, successors at each stage may take over without the need to use a gun dealer. As noted above, there are multiple ways to appoint an independent special trustee where the named successor trustee is not a natural person, or is not a California resident.
ESTATE PLANNING GOALS
No discussion of estate planning is complete without discussing goals. There is not much discussion of goals in the bulletin, and it seems the authors view non-NFA gun trust planning as primarily about avoiding the requirement to use a gun dealer for transfers. That may be one objective, and as discussed above, avoiding the gun dealer requirement is absolutely necessary for the trust to work when a trustee dies. However, avoiding the gun dealer is rarely (if ever) the primary objective as there are more important issues gun trusts can solve for American families.
The primary objective of the vast majority of estate plans is family protection. The degree of protection will vary depending on the time the attorney spends planning with the parents.
Family protection is ultimately a function of family power, which is preserved by transmitting life, fortune, and honor, to descendants. This is accomplished with a combination of tax planning, asset protection planning, and incentive planning, through trusts continuing for life and cascading through generations.
Even the simplest trust planning aims to avoid probate. AB 1292 removed the clouds of uncertainty over estate planning with guns, and provided a clear road map for avoiding probate of guns. While AB 1292 clarifies use of several alternative methods, and there are additional alternatives such as intrafamilial transfer, the revocable living trust stands out as the easiest, most comprehensive solution to protect family while avoiding probate at death.
And although AB 1292 clarified use of powers of attorney to transfer guns, the revocable living trust remains superior for avoiding conservatorship (sometimes called living probate).
But there is much more to estate planning than avoiding probate and conservatorship!
Politics is downstream of culture. Gun owning families understand the need to play the long game and preserve family power in the face of constant attacks by the anti-family Marxist Left. In particular, those with substantial firearm training understand the need for incentive planning to transmit the militia training ethic and other aspects of gun culture. Some values are crucial to maintaining gun culture, even though not directly related, for example: religion, charity, financial mentorship, family maintenance, career maintenance, homeschooling, even estate planning itself. Gun culture cannot survive without powerful families.
This can all be done with a revocable living trust providing for subtrusts continuing for life and cascading through generations.
For more serious planning, there is the option of using an irrevocable gifting trust I call the Firearms Instruction & Responsible Stewardship Trust (or FIRST Family Trust), which is also a living trust but is not revocable.
Who pays for all this training? You do of course, perhaps with a good bit of life insurance arranged by gun-friendly advisors. (Advisors: that link describes how to participate in our free training and get your free copy of WealthCounsel’s “Estate Planning Strategies” book; I wrote the chapter on estate planning for gun owners.)
Gun trust planning is the ONLY effective way to reach beyond the grave and transmit a legacy of firearm training for generations.
Only families can be trusted with protecting families.