When relationships breakdown it can leave you in emotional turmoil, but lots of people also face the agony of losing their homes because they have not put the right paperwork in place. But, what to do in the event of splitting up is not the most romantic conversation to have over dinner, so many people find themselves in exactly that situation.
That’s where a Declaration of Trust comes in to play. This is a legal document which sets out how property is held between two joint owners and specifies how the split of any proceeds of sale is to go in the event of selling a property.
In the event of a relationship breakdown, your Declaration of Trust will mean that you avoid having to rely on the court for a decision as to who owns what share of a property. They may well have a different idea of who is rewarded and it could lead to a smaller proportion awarded to you, even if you have jointly contributed from the outset.
Case: Barnes v Philips
Surely in a court of law, what’s fair is fair? Yes, but what is “fair” doesn’t necessarily mean “equal” and without the presence of a Declaration of Trust the proceeds from the sale of a property are not always split 50:50.
Take the case of the couple Barnes v Philips. After their relationship broke down, the judge awarded the split of property 85:15, even though what was put in to the property financially at the beginning was an equal share of savings. The Judge’s decision was appealed on the basis that it wasn’t fairly split, but it was thrown out by the Court of Appeal, who backed the Judge’s decision instantly.
Why did this happen? Well, the court has to ascertain the express intention of the parties as to the shares in the property. As one half of the couple remained in the home with the children, she was awarded the 85% due to the benefit of the children. This decision could have major implications for millions of unmarried couple who live together in the UK today.
What you should look out for
If you own your home jointly with your partner and the relationship breaks down then you will have certain rights, but there are a few things you should look out for:
- Joint owner or joint mortgage? There is a difference. One you will be a legal owner and the other simply a named person responsible for paying the mortgage. It’s important to check which category you fall in to!
- Beneficial interests – whilst you may jointly own your home with your partner, you may have different financial shares in the property. In the event of a relationship breakdown, solicitors may need to establish the beneficial interest or ownership of the property which can be indicated through a joint tenancy or tenancy in common ownership.
- Tenants in common vs joint tenants – if you are joint tenants with your partner then each person’s interest in the property is not quantified, so you both own the property equally. This is more common for married couples. However, if you are tenants in common your shares in the property are fixed and separate. If you are a joint tenant and the relationship breaks down, you might want to consider ending the joint tenancy agreement and becoming tenants in common instead. If you choose this route, you will need to consult a solicitor who can help you decide if this is the right course of action for your circumstances.
Where does the Declaration of Trust come in?
This is a legal agreement between the joint owners of a property and it may contain several pieces of information that will become relevant in the event of a relationship breakdown. Your Declaration of Trust will outline the distinct beneficial shares in the property and how it is owned by two co-owners as well as what happens if one of the owners dies or wants to move out.
Declarations of Trust are particularly useful to couples who purchase property but remain unmarried because in the eyes of the law you are still treated as two individuals. The document ensures that each individual, particularly if one has paid in more than the other, has protected their investment. Generally the rules become slightly different after you’ve tied the knot, at which time you may wish to revisit all of your assets and financial arrangements.
Having a Declaration of Trust can also be useful if two people decide to purchase a property but are not in a relationship, for example if friends choose to buy together or if parents put up a lump sum of money for their children to get on the housing ladder.
As you can see, property ownership can have unforeseen complications and implications and it is best that you get it right from the start. Make sure that if you purchase property with a partner that you have drawn up a Declaration of Trust outlining how much you each own – and don’t leave it to the courts to decide!
If you would like some help or more information, you can contact one of the team at Verisona Law who would be very happy to help.
Andrea is a Director and Head of Private Client department and specialises in Wills, probate and tax planning. She also advises on lasting powers of attorney and declarations of trust in relation to property ownership. Andrea is often asked to advise elderly parents and their children on the issue of trust of the family home and gift of the family home to the children.
Many clients regard her as the ‘family’s solicitor’ and come back to her whenever they need legal advice. Clients have appointed her to act as their Attorney in the event that they become unable to manage their own affairs and she has acted in this capacity on a number of occasions.
Andrea is a member of Solicitors for the Elderly.
Andrea qualified as a solicitor in 1985 and has worked as a full time solicitor since then. She has been with Gray Purdue, now Verisona Law, since 1987, initially acting for clients in matrimonial cases. Since 1999 she has advised on Wills and probate, and related matters.
She was on the Solicitors panel for the Leprosy Mission for a number of years and supports ‘free Wills’ campaigns designed to raise money for charities.
- Acted for a client whose husband died unexpectedly without making his Will and leaving her with a young baby.
- Made an application to the Court to amend the rules of intestacy to ensure that the client was able to manage financially without having to tie up funds for her baby daughter until she was older.
Acted for a client whose solicitors at the time had failed to do a deed of variation to reduce the amount of inheritance tax that was payable on his late father’s estate. Ensuring that the client received compensation for this and was put in the position he would have been had the deed of variation been prepared and signed in the time allowed.
- Probate and administration of estates
- Tax planning as it relates to wills and estates
- Lasting powers of attorney
- Registration of enduring powers of attorney
- Declarations of trust and transfers of equity
- Initial advice regarding probate and will disputes
- Living wills/Advance Directives
- Equity release
- You’ve made a Will. Now where is it?
- Declaration of Trust - is it for me?
- Rise in dementia cases highlights the need for LPAs
- Who will run your business if you cannot?
- Who would take care of your children if you die?
- Making a Will: Solicitor or DIY?
- Where there's a Will there's a way
- Declaration of Trust: Who needs one?
- ONE TO WATCH: Inheritance Test Case Headed for Supreme Court
- Shakespeare 400
- Making a Will - are you too afraid to do it?
- The devilish detail on inheritance tax
- Shakespeare 400 Part 2
- Has the time come for ‘No Fault Divorce’?
- Shakespeare 400 Part 2
- Shakespeare 400
- Where there's a Will there's a way
- Private Client. Planning for the future
- What is an Executor
- Family Law
- Why Make a Will
- What is an LPA
- LPA and Dementia Article
- An introduction to Life Interest Trusts
Director, Head of Private Client
T: 023 9224 6719