Texas law requires that a trust be funded in order to be created. Section 112.005 within the Texas Property Code (Texas Trust Code) states: “A trust is not created unless there is property in trust.” Nominal funding is sufficient to create a trust when other formal requirements for establishing the trust are met. In a battle over a large property, the San Antonio Court of Appeals ruled that the $1.00 trust funding was sufficient to satisfy the funding requirements of a valid trust. In Re: Estate of Canales, 837, SW2d 662 (Tex. Civ. App. – San Antonio, 1992). Merely writing and signing a revocable trust does not constitute a trust unless it is funded. This is why some ATF examiners have questioned ATF Form 4 grantees regarding NFA trust funding. If a trust is not funded, the transfer may be to a non-existent entity and therefore not valid. A gun trust must be funded to exist and be valid.
Funding for any Class 3 Gun Trust can be accomplished in many ways. A bank account can be opened or the property can also be transferred to the trust. Trust property is known as the “res” or the “corpus.” Documentation of ownership transfers to an NFA gun trust is required. Considering that the gun trust can last several generations and survive the death of its creator (grantor or settlor), issues often arise over what property the trust actually owns. When there’s not a soul alive to ask, documents must be checked to find out ownership. The document that shows a transfer of title to the gun trust is a Form 4 or Bill of Sale. Without either, there is no written proof for the conveyance of NFA or other tangible physical property within the trust. This can lead to costly litigation down the road if not completed correctly in a timely manner. Some time ago, a dispute arose on the large Kerrville oil tanker property.
Because the trustee of the trust created by the oilman’s will did not keep decent records, it was difficult and quite expensive to find out what property was actually in the trust and what was not. Some of the items that would be transferred to the trust or left to their heirs had stickers with the names of the trust or the beneficiaries. However, over the years, the glue had dried and the stickers had fallen off the items, making it difficult to determine who was entitled to what property. For example, the decal on the back of a $25,000 painting of Salinas, which hung on a wall in the estate’s mansion, had fallen off. The sticker on the back of a cheaper cabinet with the name of another heir had also fallen off. Both stickers were found lying on the floor, side by side, behind the dust-covered cabinet.
The dispute over who got the expensive painting versus the less expensive cabinet needed to be resolved. In any gun trust, this problem is avoided by completing a bill of sale conveying the property in question (i.e. 1862 Sharps rifle, serial number 3354) to the NFA gun trust and retaining the bill of sale with all the original gun trust document. This should be sufficient proof of the transfer of the non-NFA item to the trust. Transfer of NFA items to a gun trust requires an approved Form 4 to be valid. It is critical that a gun trust is funded and that transfers to the trust are properly documented. Martin Seidler, a Texas gun trust attorney, solves these problems by correctly wording each NFA trust he prepares along with a personalized bill of sale with instructions for use.
