When two or more people join forces to buy a house, they may contribute different amounts towards the deposit, mortgage payments and ongoing maintenance fees. To protect their investment, they should get a declaration of trust which sets out everybody’s shares and details how the value of the property would be split between them should it later be sold.
While a declaration of trust is a valuable legal document for any couple or group of people buying a property together, it is of particular interest when part or all of one person’s deposit contribution is provided by the Bank of Mum and Dad.
Why parents may want a declaration of trust
Getting onto the housing ladder is tough and many parents need to provide their adult children with financial support to help them to buy their first home. This is a huge financial commitment and they will want to ensure that their contribution benefits their child for the long term.
A declaration of trust ensures that the money gifted by parents to their child is ringfenced in the event of a future relationship breakdown so that it is returned to their child upon the sale of the property. If one is not in place, the proceeds are likely to be split 50/50.
What is included in a declaration of trust?
A conveyancing solicitor is best placed to help people find out more about a declaration of trust and to tailor the document to their own specific circumstances. In brief though, a declaration of trust will specify how much money each person has contributed to the purchase and how it will be divided in the event of a future sale.
It is designed to reduce the likelihood of future disputes by clearly articulating each person’s contributions and preferences at the outset. Although parents need not be mentioned in a declaration of trust, they would be wise to refer their children to a suitable conveyancing solicitor and recommend that they take appropriate measures to safeguard their investment.
