My Assets: Well I Declare
- AuthorPaul Hajek
The law allows you to make a statement about the ownership of your assets.
It’s particularly important where your assets include land, but can also relate to objects and also business relationships and assets.
The legal term for such a statement is a Declaration of Trust
Declaration of Trusts
How is it done? The most common way is by way of a Declaration of Trust. A declaration of trust when made in writing is a binding statement by the legal owner of an asset declaring he or she holds (and apologies for a bit of legal speak) the underlying beneficial interest in the property.
Where two or more people own an asset they can also declare the trusts on which they hold the property for themselves or for others.
The reason this is often a sensible course of action is that it avoids future uncertainty or disputes over ownership and what was intended by the arrangement.
Although declarations of trust are normally associated with land they can be used in respect of other items such as a life policy or pension benefits or many other items.
Examples of Declarations of Trust
1. You buy a valuable painting (keep buying the lottery tickets!) and then declare a trust confirming you are holding it for a relative.
Even if you keep the painting and it has pride of place over your mantelpiece your relative is still entitled to claim it.
2. You decide to buy a flat with a friend, but you provided the money for the deposit and you are both going to pay the mortgage.
You should make a declaration of trust to protect your deposit, especially if it is a large deposit, so that your greater interest in the property is protected.
3. You have set up a business with six other people and you purchase the premises for the business together, all contributing equally.
However, it is only possible to have four names on the title deeds at the Land Registry title, so a Declaration of Trust by the four registered legal owners will protect the interest of the other equal owners.
A Word of Caution When Drawing up a Declaration of Trust
You will need to exercise caution when drawing up a Declaration of Trust to avoid creating a more complicated structure which would be liable to a more complicated tax treatment.
Basically you should avoid including any statements which refer to a future interest in the asset e.g. I want my share of this flat to be given to my brother when I die.
Unless your asset is of very low value at the time of the Declaration of Trust, such as where a Declaration of Trust is used for a pension policy then other unwanted tax consequences could flow.
Another potential trap to avoid is capital gains tax if you give away an asset which has risen in value since you purchased it!
We’re Here to Help
Declarations of Trust work well and are very practical.
But there are traps to avoid as we have shown.
If you consider a Declaration of Trust may help you then please consult your solicitor to ensure your wishes are carried through perfectly.
If you would like us to help, please ring Hilary our Declaration of Trust expert on 01454 312125 for a free 10 minute chat.
Now I declare that is a great idea!
Speak to Hilary our expert Will Solicitor or Irina our expert Conveyancing solicitor on 01454 312125 and she can put you in the right frame of mind.
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