What is a deed of trust?

A deed of trust (sometimes called a declaration of trust) is a legal agreement between people who own a property. It sets out the financial arrangements for the property and how it will be owned. A deed of trust can also make provision for someone who is not an owner of the property, but has a financial interest in it.

Why would someone need a deed of trust?

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Deeds of trust are most commonly used when:

1) The owners of a property are contributing different amounts to the purchase.
2) An owner cannot be registered at the Land Registry.
3) Someone else has a financial interest in the property, for example, if an owner’s parent has provided the deposit for a house purchase.

Who can get a deed of trust?

A deed of trust can only be between owners who are tenants in common. However, if the owners already own the property as joint tenants, the joint tenancy can be severed and replaced with a deed of trust, as explained by Which?.

Deeds of trust are often made between married or unmarried couples purchasing property together or where one half of the couple already owns property. They are also often used between close family members such as parents and children.

Why is a deed of trust important?

The deed of trust protects the interests and intentions of the property owners in the case of certain life events, such as an owner having children, marrying or dying. Deeds of trust will also be relevant in bankruptcy and divorce proceedings.

Deeds of trust are particularly important for unmarried couples if one person is contributing to a property owned solely by their partner. The deed of trust can protect those contributions. In addition, a deed of trust can protect an owner’s child where the other owner is not the child’s parent.

Are there any other advantages to deeds of trust?

Deeds of trust have some advantages over wills because they are confidential, unlike wills. In addition, they may have some inheritance tax advantages.

How much does a deed of trust cost?

Costs add up quickly in property transactions but there is good news for purchasers keen to keep the deed of trust cost as low as possible. Most specialist conveyancing firms such as Sam Conveyancing offer fixed fees for a solicitor to draft the deed of trust.

Factors to consider in a deed of trust

The main thing owners usually want to consider in a deed of trust are the share of the property each partner will hold and the financial contribution of each party to the purchase price and any mortgage. As the sale value of the property will affect this, consideration should also be given to how the property will be valued and sale price divided.

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An important consideration is whether anyone else needs to be named in the deed of trust, such as a parent who gifted part or all of the deposit or purchase price. The owners should consider how the death of anyone named in the deed of trust would affect the interests in the property.

The deed of trust should help prevent most disagreements, but it is a useful protection to include provision for how any disputes will be resolved.

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