Declaration of Trust
A Declaration of Trust is an agreement between two or more owners of a property as to how they will share the income or sale proceeds of a property, and how they have agreed to share the liabilities and expenses. It can also be used when one person is the legal owner but someone else has helped or will help financially and they want that contribution to be recognised.
What if you are buying the home as an investment?
Where a property is owned by more than one person, they all have an interest in the property and are known as co-owners, whether they purchase the property as their home or an investment.
Will a Declaration of Trust determine the percentage owned by each person?
If they own as tenants in common (which means they each have their separate share) a Declaration of Trust can clarify what percentage of the property each person owns and the contributions made by each person at the time of the purchase of the property. It can also acknowledge how future contributions are to be accounted for and how any gain or loss on sale is to be dealt with.
What about how any expenses are paid?
The Declaration of Trust can also contain details of how the property expenses will be paid, responsibility for insurance, repairs, mortgage, maintenance etc. It may also provide a mechanism for the sale of the property in the event of a breakdown in the relationship or on the death of one party.
Does this mean you need a Will?
In such cases, it is advisable to make wills to deal with the share of the person who has died. Without a will, the intestacy rules will apply and these do not recognise relationships other than marriage or civil partnerships.
Do you need to be an owner of a property to require a Declaration of Trust?
Declarations of Trust are also needed where one individual is just a contributor to a property but does not own the property. In such a case the person might be paying for the mortgage directly or indirectly or paying for an extension on the property. It might even cover where one person is making all of the financial contributions but another is using time and expertise in renovating the property which will in due course increase its value and that effort and contribution have to be recognised.
Are you clear about whether you need one?
It is important that you have a very clear idea as to how you would like ownership of the property to operate. It is, therefore, important that you discuss the working of the trust before you commit yourself to ensure fair results. If you would like to speak with someone further about the content of this article and your personal options, our team are here to help.