Do I Need a Declaration of Trust?
Property| 04.07.2025
A Declaration of Trust, sometimes referred to as a ‘Deed of Trust’, is a legal document used when a property has more than one beneficial owner, setting out the agreement between those parties. A Declaration of Trust is a type of Deed of Trust, but for the ease of understanding, most Solicitors don’t differentiate between the two. When entering into a Declaration of Trust, the property in question is placed into trust. Declarations of Trust offer crucial legal and financial protection to anyone with a shared beneficial interest in a property. In this article, we will explain the basics of Declarations of Trust, including when they are needed, the benefits offered, and what is meant by a beneficial interest.
Do I need a Declaration of Trust?
A Declaration of Trust is not legally required, but you may benefit from the protection one offers if you have a beneficial interest in a property in England or Wales with another person (or persons) such as friends, family, an unmarried partner, or a co-investor. Declarations of Trust are often entered into by parents who help to buy a home for their children. In addition, if a property is purchased with unequal deposits, it is worth considering this type of legal arrangement.
What is a ‘beneficial interest’?
You may have a ‘beneficial interest’ in a property if you will benefit from its sale or income from rental. Just because a person is the owner of a property does not necessarily give them a beneficial interest. This might be the case if a trustee holds legal title to a property under a discretionary trust. And likewise, just because a person has a beneficial interest does not make them a legal owner, for example, if a parent puts money into a home for their children but does not hold an ownership stake.
What are the benefits of a Declaration of Trust?
The main benefit of a Declaration of Trust is clarity of ownership. It means that anyone with a beneficial interest in a property has a shared understanding of their legal position. It shows exactly who owns what share of a property; this is especially helpful where the legal ownership and beneficial ownership differ. The other key benefits are as follows:
- Reduces disputes between those with a beneficial interest in a property
- Allows funds placed into a property to be protected (ring-fenced)
- Provides evidence for HMRC when dealing with inheritance tax and capital gains tax
- Protection from care home assessments and creditors
- Estate planning – e.g. if one owner dies, a Declaration of Trust can ensure that their share should pass under their Will or the rules of intestacy, rather than automatically passing to the co-owner. In addition, it can ensure that the property is protected for children from a previous marriage when it comes to inheritance.
Declarations of Trust – what else do I need to know?
If you are considering entering into a Declaration of Trust, it is also important to consider the following:
- While there is no requirement to do so, it is recommended to register your Declaration of Trust with the Land Registry. Doing so will place on the public register that the property is held on trust.
- The Declaration of Trust will normally remain in place until the property is sold, the trust is terminated, or the trust obligations have been met.
- A Declaration of Trust can be changed if there is agreement between all parties to do so.
- A Declaration of Trust can only be overturned in the event of fraud, misrepresentation, undue influence, or duress.
- A Declaration of Trust will only be legally binding if it is clear and legally accurate, entered into willingly, all parties have mental capacity, and it is signed and witnessed correctly.
- If you are considering putting your home into trust to avoid future care home fees, it is essential to speak to a property law solicitor before doing so. The reason is that if the local authorities can show the Declaration of Trust was entered into shortly before you go into care, this will be seen as an attempt at avoidance of paying care fees.
Final words
Entering into a Declaration of Trust provides much-needed peace of mind that everyone with a beneficial interest in a property has a common understanding and that their financial position is protected. Even if you believe that a dispute would never arise between you and your friends, family, or co-investors, taking a cautious approach will ensure that everyone’s intentions are legally recognised. Due to the complexity of the law in this area, a Declaration of Trust should be drafted by a property law Solicitor to make sure it is clear, accurate, and legally valid.
Pearcelegal has a dedicated team of property law solicitors who provide practical legal advice and support on all matters related to property trusts. To make an appointment, please contact us on 0121 270 2700 or enquire through our contact form.
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