Ashfords Solicitors - Joint Property and Declarations of Trust

Joint Property

There are two ways of owning a property jointly with others.

The first, and most usual type of joint ownership which exists unless there is an agreement to the contrary, is called a 'Joint Tenancy'. Joint Tenants own the whole property and if one dies the surviving joint owner(s) is automatically the owner of the property even if the deceased has left his or her estate to someone else in their Will.

This is often inappropriate, as in the case of a business or partnership, where two or more friends buy a house together or in the case of a second marriage, e.g. where one party wants to protect his or her share of the property for their children from their first marriage. In such circumstances it is better to own as Tenants in Common. In this case each tenant in common owns a specific share of the property (typically 50% each if two owners) and is then free to leave his or her share under their Will.

People may consider that, if they are Joint Tenants, there is no need for a Will as the survivor will get the property. However, it is impossible to know which joint owner will survive or for how long, and unless there are children of the joint owners who inherit, the distribution of the asset then becomes a lottery.

If a husband and wife die simultaneously, the law states that the husband's family will receive his assets and the wife's family hers but this does not apply to property owned by joint tenants because the proportions are not identified. In these circumstances the youngest joint owner is deemed to have survived, so that his or her family would inherit the asset, while the other joint owner's family gets nothing. The younger spouse or joint owner should not be complacent; after all, the elder may survive for an hour or two in which case the situation would be reversed. It is only by making a Will that a fair distribution can be guaranteed, whatever unfortunate circumstances may arise.

Declaration of Trust

What is a Declaration of Trust?

A Declaration of Trust is a statement by the legal owners of property which sets out who should benefit from that property. Often it will confirm the contributions of the parties in acquiring the property, whether the parties agree to mortgage or charge the property and if so who is to be responsible for any mortgage. It can also confirm who should pay for repairs and outgoings and what the parties intend to happen to the property if one or both party dies, leaves or wishes to sell or dispose of his or her interest.

In other words, it provides vital evidence where the legal owner of the property is not solely entitled to its sale proceeds.

Why have a Declaration of Trust?

The main advantage of a Declaration of Trust is that it should provide a solution to any expected or unexpected events which may happen in the future such as death, separation or sale. It is surprising how straightforward it can be to agree the intentions in the initial stages of acquiring the property and recording those intentions formally at that time rather than trying to resolve them later when relations may have soured or it is no longer the individual who is involved in negotiations but, say, his executors. They would have their own legal duties in relation to the property which could conflict with what was originally intended.

If you decide that a Declaration of Trust is appropriate for you, make sure you are advised on any tax implications which may result. If any deemed gift arises between non-spouses there are likely to be inheritance tax and capital gains tax implications for all parties concerned.

Declarations can be made in relation to other assets as well as property.

Ashfords are able to offer you bespoke Declarations of Trust or the choice of a simple Declaration from a menu covering the majority of cases if your circumstances are straightforward.