Declaration of Trust

 

Declaration of Trust

Deciding to purchase a property with a partner, friend, or another party is exciting. However, having a Declaration of Trust is particularly important for those not in a formal marriage or civil partnership. While the title at Land Registry will show the legal ownership of the property, it will not specify the shares in which you own it. 

Therefore, declaring your ‘beneficial interests’ through a Declaration of Trust will ensure you set out your intentions, helping avoid disputes later or misunderstandings of who owns what.

In this blog, our specialist property lawyers answer some frequently asked questions about Declarations of Trust and why they are important when buying a property with someone you are not married to or in a civil partnership with. 

What is a Declaration of Trust

A Declaration of Trust, sometimes known as a deed of trust, legally verifies the co-owner’s shares, rights, and obligations of the property. For those buying a property as a joint owner or those getting financial help from someone else, such as a parent, Declarations of Trust should be considered.

A Declaration of Trust also helps ascertain details of the ownership and shares passing to an estate if one or more owners die.

Typically, the property owners will name themselves as beneficial owners. However, it is also possible to hold the property in trust for someone else, even if they do not benefit from the property immediately.  

While a Declaration of Trust is legally binding in the UK, a Family Court has the power to disregard the ownership stated in the document, allocating it to another party in divorce proceedings when dividing financial assets, for example.

What is included in a Declaration of Trust?

There are no set rules for what you include in a declaration of trust, which ultimately will depend on your circumstances. However, seeking specialist legal advice to ensure a Declaration of Trust is correctly drafted to protect your interests and legal rights adequately is essential. Typically, a Declaration of Trust will include, but is not limited to:

  • The percentage of the property each person owns and how the will money be split if the property is sold.
  • Financial contributions expected by each person towards the mortgage, and how will the mortgage ultimately be paid off.
  • How the property will be passed on to other beneficiaries in a Will.

A property solicitor can help you understand what should be included and tailor it to your needs, ensuring the document drafted correctly. 

What is a Joint Tenant or Tenant in Common? 

The property can be owned as either joint tenants or tenants in common and it is important you understand the differences between the two.

  • Joint tenancy – is where the property is owned equally by the named owners, with no specified shares, which means that the property owners with joint tenancy both own 100% the property. When one owner dies, the property will automatically pass to the surviving owner. On the death of the last surviving owner, the property will be distributed as per the terms of the last, late owner’s Will. You cannot pass ownership of the property under the terms of your Will if you own a property as joint tenants whilst there is a surviving owner.
  • Tenancy in common – is where owners of the property have a specific set of shares, such as half or a quarter ownership. When one owner dies, their share passes to the beneficiaries stated in their Will. Their share does not automatically pass to the other owner(s).

Various considerations will need to be addressed when setting up specific joint legal ownerships and advice should be taken from an appropriate legal professional.

Do I need any other legal documents?  

Ideally, yes, one of the most important of which is a valid Will. Without one, your property share will pass per the government rules of Intestacy, which may not reflect your wishes. Depending on the type of legal ownership you have, there are other implications you will need to consider. Click here to read more about Wills. 

A Declaration of Trust can help minimise property disputes 

Without a declaration of trust, disputes over property ownership can be more complex to resolve. While asking a court to intervene and determine your rights is possible, the litigation process is lengthy, costly, and very stressful. Furthermore, the party who contributed the most may ultimately lose out if there is no evidence of an agreement on who owns what shares of the property.

Do you need a Solicitor to prepare a Declaration of Trust?

Declarations of Trust can be prepared without a solicitor. However, there could be severe legal implications if wishes are incorrectly reflected. Furthermore, mistakes could result in the document being rejected in a court of law. With that in mind, you should only attempt to draw up a legal document of this nature with some form of legal guidance. Seeking legal advice from a regulated property lawyer with expertise in this area of law can ensure the document is legally binding and your legal rights are protected.

Declaration of Trust Solicitors Alton

When buying a property, whether in your sole name or with a partner or if you plan on moving in with a partner, you must get advice about the implications of the various forms of property ownership.

Our specialist property team can provide you with the highest quality guidance and handle all aspects of declarations of trust and conveyancing transactions on your behalf.

Feel ready to make your decision or need advice regarding a declaration of trust or property purchase? Get in touch now!

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