With house prices and interest rates at an ultimate high, individuals and couples are looking for alternative arrangements when it comes to purchasing a property. For many, this will include buying with partners or friends, whilst others may seek financial support from parents and relatives.
What is a Declaration of Trust?
A declaration of trust is a legally binding document that records the financial arrangements between joint property owners and anyone else with financial interest in the property.
A declaration of trust is usually made at the time of buying the property. Once this document is in place, all parties will know exactly where they stand if the property is sold, or if one person wants to be bought out in the future.
If there is no declaration of trust in place, it becomes difficult to tell who is entitled to what and can often cause stressful situations, damage to relationships and potentially costly litigation.
When is a Declaration of Trust required?
A declaration of trust can be required in various circumstances, for example:
• If you’ve bought a property with someone else: For couples that buy a property together, a declaration of trust can clearly set out everyone’s financial contribution. In the event of the property being sold, a relationship breaking down, or the death of one of the parties, the entitlement and share of equity is clearly defined.
• If you’ve received financial help: If the ‘Bank of Mum and Dad’ or any other individual has supported the purchase of the property, they may eventually want their investment back. This can be clearly recorded.
What should be included?
As every situation is different, a qualified solicitor will help to tailor the declaration of trust to your requirements.
The document should include the following details:
• How much each party has financially contributed to the deposit.
• If there is a mortgage, how much each party will be contributing to the monthly payments and other outgoings.
• If the property is rented out, how the rent should be divided.
• If the property is sold, how the net proceeds should be divided.
• An agreed way of valuing the property.
Can I change the Declaration of Trust once it’s in place?
As your situation changes you may need to update your declaration of trust. This could be done via a deed of variation which refers to the existing declaration and adds the new clauses you need.
Note: Consent will be required from all parties involved.
What happens if you get married?
Many cohabiting couples will get married. Whilst your declaration of trust will usually still stand, in the event of a divorce the provisions of the Matrimonial Causes Act 1973 will apply. We would recommend considering a pre-nuptial or post-nuptial agreement to capture the details of what should happen if you were to separate or divorce. You should also review your Will.
How Blaser Mills Law can help
Declarations of trust can seem complicated, but it is an extremely useful way of protecting funds and providing certainty in the future. At Blaser Mills Law we have extensive experience with all types of trusts and will help you decide on the most efficient and secure planning for your estate.
For further information or advice, please contact the Wills, Trusts, and Probate team at Blaser Mills Law on: 01494 781362 or by email at privateclient@blasermills.co.uk.