Gun Trust: Funding And Proof Of Ownership

Texas law requires a trust to be funded in order to be created. Section 112.005 of the Texas Property Code (Texas Trust Code) provides: “A trust cannot be created unless there is trust property.” Nominal funding is sufficient to create a trust where the other formal requirements for the establishment of a trust are met. In a battle over a large estate, the San Antonio Court of Appeals ruled that the funding of a trust with $1.00 was sufficient corpus to meet the funding requirements of a valid trust. In Re: Estate of Canales, 837, S.W.2d 662 (Tex. Civ. App. – San Antonio, 1992). The mere drafting and signing of a revocable trust does not create a trust unless it is funded. This is why some ATF examiners have questioned ATF Form 4 transferees regarding NFA trust funding. If a trust has not been funded the transfer may be to a non-existent entity and therefore invalid. A gun trust must be funded to be in existence and valid.

Funding of a Class 3 gun trust may be accomplished in many ways. A bank account can be opened or property can be transferred into the trust. Trust property is know as the “res” or the “corpus”. It is vital to document transfers of property into an NFA gun trust. Since the gun trust can last several generations and survive the death its creator (grantor or settlor), issues often arise as to what
property the trust actually owns. When there is no one living to ask, documents must be reviewed to determine ownership. The document which reflects a transfer of title into the gun trust is a Form 4 or Bill of Sale. Without one or the other there is no written proof of the conveyance of NFA or other tangible physical property into the trust. This can lead to expensive litigation in the future if not done correctly in a timely manner. A few years ago, litigation arose in the large estate of a Kerrville oilman. Since the trustee of the trust created by the oilman’s will did not keep good records, it was difficult and quite expensive to determine what property was actually in the trust and what was not. Some of the items to be transferred to the trust or left to the heirs had stickers with the trust or beneficiaries names thereon. However, over the years the glue had dried up and the stickers had fallen off of the items making it difficult to establish who was entitled to what property. For example, the sticker on the back of a $25,000.00 painting by Salinas, hanging on the a wall in the estate’s mansion, had fallen off. The sticker on the back of a less expensive armoire with another heir’s name thereon had also fallen off. Both stickers were found lying on the floor, next to one another, behind the armoire covered in dust. The dispute over who received the expensive painting versus the less expensive armoire needed to be resolved. In a gun trust setting this problem can be avoided by simply filling out a bill of sale conveying the property at issue (i.e. 1862 Sharps rifle, Serial # 3354) to the NFA gun trust and keeping the bill of sale with the original gun trust document. This should be sufficient proof of transfer of the non-NFA item into the trust. The transfer of NFA items into a gun trust require a approved Form 4 to be valid.

It is vital that a gun trust be funded and transfers into the trust be properly documented. Martin Seidler, a Texas gun trust lawyer, solves these issues by properly drafting each NFA trust which he prepares along with a custom Bill of Sale with instructions for use.

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