A Declaration of Trust – Do you need one?
A Declaration of Trust (often called a Deed of Trust) is a legally enforceable document that is often used when more than one person is involved in the purchase of a property and is used to confirm who owns what or owes what to whom.
1. Someone personally lends money for the purchase of a property to an individual or a couple (such as Mum and/or Dad).
2. The property is being bought jointly but in different shares.
The declaration of Trust should ideally be drafted and signed by all parties concerned when the property is being bought or as soon after as possible.
The Declaration of Trust will set out;
A) How much was lent
B) By whom
C) To whom
D) On what agreed terms
E) What contribution to any mortgage each party will make
F) Who owns what %
G) What equity will be owned by whom when the property is sold
It is advised that such a property be bought as tenants in common, otherwise the whole property will be owned by the survivor if one party dies, which if there are children involved and the survivor remarries can create sideways disinheritance (the children lose their inheritance) should the survivor then marry and subsequently divorce or die without a valid Will in place.
Remember the Land Registry does not have the capacity to register who owns what shares of a property or indeed who owes who for a loan (other than a mortgage). The Land registry simply notes if the property is jointly owned (the last person alive in the joint arrangement will own all of the property) or tenants in common, which will always be deemed to be 50/50 in the absence of a Declaration/Deed of Trust.