Declaration of Trust - do I need one?

What is a Declaration of Trust?

A ‘Declaration of Trust’ is something that you should think about if you are buying a property with another person or if you own a property with another person. You will be asked how you wish to hold the property. There are two options. The property can be held as:

• ‘Joint Tenants’, or

• ‘Tenants in Common’.

Joint Tenants

If you own the property as Joint Tenants, then each owner owns the property as a whole, as opposed to having a distinct share. This means that if one owner dies, then the property will pass automatically to the surviving owner, irrespective of what is said in the deceased’s Will. The surviving owner will become the legal owner of the property and can deal with the property as they wish.

Tenants in Common

It is very common for people to hold their property as Joint Tenants, especially married couples. Unsurprisingly this is the most common way of co-owning property. However, there is an alternative known as a ‘Tenancy in Common’.

If people own their property as Tenants in Common then, each party has a distinct share in the property. In this situation, if one owner dies, his or her share does not pass automatically to the surviving owner, but passes according to their Will or under the ‘intestacy rules’ if there is no valid Will.

Reasons to hold as Tenants in Common

Why would you want to hold the property as Tenants in Common?

Some reasons:

• Unmarried couples who are buying a property together.

• A married couple may not want their share of the property to pass to the surviving spouse outright on death. For example, if the surviving spouse remarries and there are children from both marriages, you may want to gift your share in the property through an appropriate structure which ensures that all the children are treated equally.

• Owners may have made unequal contributions to a property purchase.

If this is the case, then you should document this. In the event of a future sale of the property or if the relationship breaks down an equal division of the sale proceeds is assumed unless otherwise indicated.

• Asset protection reasons, such as future care fees.