Declaration of Trust

A Declaration of Trust can clarify:

• The position of each owner if the relationship were to breakdown.

• How future sale proceeds are to be divided.

• Whether shares in the property are determined by the financial contribution of each party during the period of ownership (e.g. home improvements).

• The treatment of future improvements.

• The payment of outgoings relating to the property.

• The procedures for one party to buy out the other owner’s share. This is helpful if communication between owners has broken down.

Parental Contributions

Increasingly, the ‘bank of mum and dad’ helps children with the purchase of property, but is not named on the legal title. It is important to record if the contribution is a loan or gift, especially in the case of family loans.

If it is a gift, a gift to a child may not be a gift to the child’s partner as the other joint owner. If the relationship breaks down, the child’s share can be protected by a Declaration of Trust. A gift by a parent can also be beneficial for inheritance tax purposes. The Declaration of Trust records the gift which can avoid future issues within the family and HM Revenue and Customs. In addition, if a parent making a lifetime gift wants to ensure that all their children are treated equally, but cannot make the same lifetime gift to the other children, then provision needs to be included in their Will.

BE AWARE!

Without a ‘Declaration of Trust’, there is more chance of time-consuming disputes about the division of proceeds when a property is sold especially if the relationship breaks down. This can be costly. 1

If you do enter into a Tenants-in-Common agreement, make sure your Will is also reviewed and is clear on who is to benefit from your share of the property upon your death. 2

If you are a Joint Tenant, but feel that it would be better to own your property as Tenants in Common, then we can help change this. 3