Do I need a Declaration of Trust when buying a property with a partner or friend?
Written by Claire Thompson | Wills, Trusts, Tax and Probate Team | 04 January 2024
What is a Declaration of Trust?
A Declaration of Trust is a legal document that outlines the ownership and shares of a property owned by more than one person. This can be particularly helpful for unmarried couples or friends who live together.
Buying a property together is a significant milestone for any couple, but for unmarried partners, it comes with it’s own unique considerations. If your relationship is not legally recognised by a marriage or civil partnership then your contributions to a jointly owned property can be particularly vulnerable in the event of a separation (although this can still be an issue for married couples and couples in a civil partnership).
One way to protect your share of a property is to create a Declaration of Trust. Here's 5 reasons why you should make sure you have a Declaration of Trust in place:
1. It protects your contribution
In the absence of any evidence to the contrary it is presumed that a jointly held property is held equally between its owners. This means that if there are two owners the presumption is that you own half each. A Declaration of Trust can change this presumption so that if you contribute a larger sum you own a larger percentage.
2. It protects a gifted deposit
You might receive a gift from a loved one (such as a parent) to help you onto the property ladder and want to ensure that you keep this gift if you separate from your partner. A Declaration of Trust allows you to protect a specific sum and then to state how the remainder of the sale proceeds will be divided (which can be equally or unequally).
3. It’s flexible
You might not know how much you are intending on contributing to the property as the property may require renovation or you may purchase the property then decide to build an extension which increases the value of the property but is only funded by one person. A Declaration of Trust can be written to be extremely flexible so the amount that each party receives when the property is sold is dependent on the financial contributions they have made during the period of ownership.
4. It can specify what happens when the property is sold
A Declaration of Trust can include clauses which specify what happens when the property is sold. This can be a partner having the right to buy the other’s share of the property from them or can set out how the value of the property is to be agreed if the parties disagree.
5. It avoids future arguments
A Declaration of Trust can be as simple as how sale proceeds are divided or as complex as dictating how the property can be used and who pays for which expenses. It helps to prevent disagreements between parties as there is written confirmation of what should and shouldn’t be done.
Your home is usually your biggest asset and, in the event of a split, a Declaration of Trust makes a difficult time less complicated.
If you would like to find out more, please call our expert Wills, Trusts, Tax and Probate team on 01752 827067 or email wills@nash.co.uk.
