Answer: For all situations where there is a greater contribution by one party, it is worthwhile seeking advice as to whether a Declaration of Trust may be appropriate. A Declaration of Trust is an agreement between two or more people as to how much each party is entitled to in the event of a sale of the property. This can be done (preferably) before or after purchase and often used where, for example, a new partner is moving into a property which has equity possibly built up by the other party including monies from a parent, inheritance or monies from an earlier property. Without a Declaration of Trust, it may be that if the parties subsequently separate the other party may seek 50% interest in the property even if they have not contributed 50% towards the equity in the property. The situation is particularly complicated where there is an extended family involved, ie children from an earlier relationship and a party wishes to ring fence certain monies for them.
Certainly, parents often help their children financially, but wish to safeguard their contribution in the event of a relationship breakdown with, say, their adult child’s partner. A Declaration of Trust can also include a contribution from a third party and have that person be a party to the document.
Declarations of Trust are also particularly useful where a property is purchased to rent out and one party is a higher rate taxpayer and the other party is a lower rate taxpayer as this ensures that the rental income is taxed appropriately where the lower rate taxpayer has possibly paid a higher amount of the equity.
Certainly, anyone owning a property should also ensure that they have an up to date Will providing that their assets are left to a person or persons of their choosing.
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