Declaration of Trust

Investing in property is a significant step, especially when you're making the move with someone else. To make the process smoother and to protect all parties involved, we suggest considering a Declaration of Trust, also known as a Trust Deed. This isn't just a piece of paper, but a legally binding document that carefully lays out each party's stake in the property and charts out how issues related to the property should be handled in the future.

So, what exactly is a Declaration of Trust, and what does it clarify?

1. Ownership: A Declaration of Trust makes it clear who owns the property and to what extent. This is represented in the form of percentage shares.
2. Type of ownership: It outlines whether the property is jointly owned (joint tenancy) or if it's owned by two or more people with separate shares (tenancy in common).
3. Initial contributions: The document details how much each party initially invested in the property. It also sets out how the proceeds would be divided if the property were to be sold.
4. Contingencies: It establishes a course of action in the unfortunate event of the demise of one of the parties involved.

You may wonder why you need a Declaration of Trust. Here's why it could be beneficial:

1. Fair division: It ensures each contributor gets their rightful share of the property back if it's sold, and documents any changes that may occur.
2. Income division: The Declaration of Trust helps decide how the income from a rental property is split for income tax purposes between co-owners.
3. Tax reduction: It could potentially help reduce the tax you pay when purchasing additional properties.
4. Gifting: It allows you to gift a share of property to someone or place it into a trust.
5. Protection: It serves to protect your share of a property in your estate if unexpected circumstances arise, offering protection against Inheritance Tax Charges.

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So why should you consider having a Declaration of Trust drawn up? Here are the core benefits:

1. Financial safety: It helps protect everyone's financial contributions towards the property.
2. Avoiding disputes: It minimizes the potential for disagreements in the future, which are common when clear boundaries and rules aren't established from the start.

The benefits of a Declaration of Trust don't end here. It can also shield the 'beneficial owners' of a property. For example, if a parent generously contributed towards the deposit of your house, a Declaration of Trust ensures that they get their investment back if the property is sold.

Not having a Declaration of Trust can lead to various challenges. Your financial investment in the property might be at risk without this legal safety net. Furthermore, the absence of a clear agreement could lead to bitter disputes between co-owners about the property's future and the division of any equity. However, these potential problems can be avoided with the right planning and foresight. By agreeing to these details upfront through a Declaration of Trust, you gain the peace of mind that your interests will be secure.

The world of property ownership and legal documentation can seem daunting, but our team is here to guide you through it. Our solicitors are friendly, approachable, and thoroughly professional. We can discuss your individual circumstances and advise whether a Declaration of Trust would be beneficial in your situation. Our goal is to make legal processes easy to understand, giving you the confidence to make informed decisions.

If you'd like to know more about Declarations of Trust or if you have any other legal questions, don't hesitate to reach out to us. Let's navigate the legal landscape together, ensuring your interests are always protected.

Get in touch with our experts today for free, no obligation legal advice

0161 521 0829

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