September 21, 2023

Epic Law

The Law Folks

Gun Trust – Funding and Proof of Ownership

Texas law requires a trust to become funded to be created. Section 112.005 within the Texas Property Code (Texas Trust Code) provides: “A trust is not created unless there’s trust property.” Nominal funding is sufficient to create a trust where other formal requirements for the establishment in the trust are met. In a battle over a large estate, the San Antonio Court of Appeals ruled that funding of the trust with $1.00 was sufficient corpus to satisfy the funding requirements to 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 fails to form a trust unless it’s funded. This is why some ATF examiners have questioned ATF Form 4 transferees regarding NFA trust funding. If a trust is not funded the transfer might possibly be to a non-existent entity and for that reason invalid. A gun trust ought to be funded to be in existence and valid.

Funding of any Class 3 gun trust may be accomplished in many ways. A bank account can be opened or property can also be transferred into the trust. Trust property is know for being the “res” or the “corpus”. It is necessary to document transfers of property into an NFA gun trust. Considering that the gun trust can last several generations and survive the death its creator (grantor or settlor), issues often arise about what property the trust actually owns. When there is not a soul living to ask, documents has to be reviewed to find out ownership. The document which displays a transfer of title into the gun trust is a Form 4 or Bill of Sale. Without either there’s no written proof for the conveyance of NFA or other tangible physical property within the trust. This may lead to expensive litigation in the future if not correctly completed in a timely manner. Some time ago, litigation arose in the large estate of a Kerrville oilman.

Because the trustee from the trust created by the oilman’s will didn’t keep decent records, it was difficult and quite expensive to find what property was actually within the trust and what was not. A few of the items to be transferred to the trust or left to their heirs had stickers with the trust or beneficiaries names thereon. However, over the years the glue had dried out and also the stickers had fallen off from the items making it difficult to ascertain who was simply entitled to what property. For instance, the sticker around the back of a $25,000.00 painting by Salinas, hanging over the a wall in the estate’s mansion, had fallen off. The sticker on the back from a cheaper armoire with another heir’s name thereon had also fallen off. Both stickers were found lying about 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 any gun trust setting this issue is avoided through 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 all 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 critical that a gun trust be funded and transfers to the trust be properly documented. Martin Seidler, a Texas gun trust lawyer, solves these issues by properly drafting each NFA trust which he prepares in addition to a custom Bill of Sale with instructions for use.