If, for some reason, you do not want to own a property jointly with someone in equal shares, you can set up a Deed of Trust. This is a document that records exactly how the shares of a property are owned.
What is a Deed of Trust?
A Deed of Trust is a way of recording the terms on which a ‘beneficial interest’ in a property is held. It is important when a property is sold or transferred because it determines how the proceeds are distributed. However, the trust can also specify the day-to-day management of the property ownership including payment of bills.
Why would you need a Deed of Trust?
According to the UK government, trusts are often set up by families. They are frequently used to protect family assets. However, they are also useful when someone is either too young to handle their financial affairs or is too incapacitated to do so. They are a useful way of recording and returning what you personally put into a property. For example, if you paid more towards the purchase price, you would get this back if the property was sold.
What are the different types of trust?
There are several types of trust as can be seen here: https://www.samconveyancing.co.uk/news/conveyancing/deed-of-trust-4378.
You can use a Deed of Trust when buying a home. Unmarried owners can use the trust to control what would happen if they broke up. Also, husbands and wives who are landlords can use a Deed of Trust to share the rental income from property in the most tax-efficient way. There is even a floating shares deed where beneficial interest can go up and down.
Are Deeds of Trust legally binding?
Yes, these are legally binding documents that give owners protection. All parties have to abide by them. However, Family Courts can disregard them when dividing financial assets in divorce proceedings.
Also, Deeds of Trust cannot be amended. It is possible to agree on a supplementary Declaration of Trust which amends the original one. Reference is made to the original trust but updates it with the new division of shares.
What happens if one of the parties dies?
If one of the owners of the property dies, their share does not automatically go to the other person if there is a Declaration of Trust. Their share will be distributed according to the terms of their will. If that person does not have a will, the rules of intestacy will apply. This is why it is so important that people entering into a Declaration of Trust have a will. It prevents conflicts when one of the parties to the deed dies.
