Are a Declaration of Trust and a Deed of Trust the same?

A Declaration of Trust and a Deed of Trust are often used as interchangeable terms, but there is a nuance between what they actually involve. Here we will take a quick look at when and how you should use one or the other.

When is a Declaration of Trust appropriate?

Often unmarried couples will purchase a property together and one party may be contributing more cash than the other either as a deposit or in any mortgage repayments. If the relationship breaks down, the parties could be trapped in a legal minefield. A Declaration of Trust will help to alleviate this problem by creating a structure when it comes to dividing the proceeds of a sale.

A Declaration of Trust will also govern how the proceeds of any income from the property are divided if it is rented out for gain. When a property is rented out, you may pay tax on any income. However, this will depend on how much you have contributed to the purchase as set out in the Declaration of Trust. If you are married or in a civil partnership, you will be assessed on a 50-50 basis.

You can, of course, include a Declaration of Trust in a Deed of Trust. If you need to find more information about what is a deed of trust and the costs involved, you can find it online.

Conclusion

It is important to understand that a trust deed is both legally binding and enforceable in court. These documents explain in more detail what appears in the title deed found at the Land Registry. It explains the proportional ownership of the property, and in case of any dispute is an essential document.

Although you may enter a joint purchase of property with the best intentions, it is important for both parties to understand what is involved if the relationship breaks up and disputes become inevitable. Consequently, it is vital that you finalise any Declaration of Trust before you complete on a property and ask your advisor to address the issue.