Declaration of Trust Explained
When it comes to the law, it’s important to know your rights and to have legal documents in place that protect your assets and personal finances. Declarations of Trust or Trust Deeds as they’re often known, are used to record the beneficial ownership of a property between two or more parties and help protect investments when things don’t go as planned.
With this in mind, let’s find out more about Trust Deeds and why seeking professional advice is the best way to achieve peace of mind.
A Trust Deed may be necessary when:
- You Buy a New Home
Multiple people can legally own a property. But they may not have equal interest in the equity. A Declaration of Trust therefore protects the initial contribution made toward the purchase price.
Let’s look at an example. Married couple Sam and Tom buy a property. Sam puts £50,000 towards the purchase price and Tom puts £35,000 towards it. The remaining funds are from a mortgage. Sam and Tom outline their contributions in a Trust Deed and have these amounts returned to them on a future sale or if their property.
Contributions can also be reflected as a percentage. For example, Lisa contributes £20,000 towards a property purchase. Ben contributes £5,000. The remainder is made up of a small mortgage. The proceeds are then split according to the contribution percentages – 89% goes to Lisa and 11% goes to Ben.
As finding money for a house deposit or purchase often involves family money from parents or grandparents, protecting funds is essential. Even if you’ve already bought a property with someone or agreed that a partner can share your home, you can still enter into a Declaration of Trust – it’s never too late.
- Investing in a Second Property
When investing in a second property, a Declaration of Trust can be used to set out the beneficial ownership as above. It also states how the rental money will be paid, as if a couple are renting their second home, only one person is likely to receive the funds. Rent is sometimes received on an unequal basis too, especially if one person owns a significantly larger percentage of a property than the other one. So, the details around the agreement must be noted.
A Declaration of Trust also allows the correct income tax to be attributed to the rental income. Kent tax advisors can help you with this, ensuring all tax is paid correctly and on time.
What Happens to a Declaration of Trust After Death?
A Declaration of Trust will be considered in the estate administration of a deceased Trustee. The deceased’s share in one or more properties mentioned in the Declaration will pass to the named beneficiary in their Will. If the deceased did not have a Will, intestacy rules will apply. A Kent accountant for probate services will ensure all matters are handled correctly and sensitively when someone passes away.
If you’re looking to manage your finances and get your estate in order, seek estate planning advice today from an expert in the field such as Nick Hughes. With experience in wealth planning and tax, particularly in relation to individuals with non-doms status, specialists such as Nick can provide invaluable assistance.
