We’re getting married and going to live happily ever after. Right?
When planning a wedding, no couple wants to think about the possibility of the marriage failing in the future – but putting romance to one side and taking time to agree some basics can save a lot of cost and heartache in the future should things not work out as you had planned.
You may be planning to buy your first house together, one of you may be moving into a house owned by the other, or anything in between – it’s important that you give some thought as to how your respective interests in the house will be protected. This can be done by a declaration of trust.
This isn’t negative thinking – it’s positive planning, and shows that you respect each other and are mature enough to agree how the house should be dealt with if your relationship fails and you split up.
What is a declaration of trust?
It is a document which can be prepared where two or more people buy a house together, to record who has paid what towards the purchase cost and other outgoings, and how the joint owners plan to divide the sale proceeds at a future date.
When is it used?
Declarations of trust are most commonly used where the deposit, purchase price or outgoings in respect of the property are not met equally. They can also be used to record money which is paid towards the purchase by other people – for example a parent.
What does it cover?
The document can cover:-
• contributions to the deposit
• how the mortgage payments are going to be met
• how other payments such as utility bills and insurance are going to be paid
• if the house is sold, how the net proceeds of sale (after payment of the costs of sale, such as estate agents’ commission and legal fees) are to be shared between the couple and any third parties, eg a parent who helped out
• provisions to protect your children – for example, to permit children to stay in the property until they reach 18 or a greater age
• an agreement as to how the house should be valued, if a dispute arises
• provisions for buying each other out
Does it have to be in writing?
Yes, any agreement in respect of land should always be in writing to be valid.
Is it complicated?
How complicated the document needs to be will be dictated by your situation. Many declarations of trust are very straightforward, and simply record agreement as to the percentage shares which each owner has in the property.
Can we do it ourselves?
Your house is probably the most valuable asset you will acquire during your lifetime. It makes sense, therefore, to take proper advice from a solicitor as to how to best protect your investment in it.
The couple should each take their own, independent, legal advice, from their own solicitors. This ensures that each will each receive legal advice tailored to their own position. it is not possible for the same solicitor to advise both of you because of professional rules relating to what is called conflict of interest.
What if our circumstances change?
The deed can be re-written by the parties at any time provided they are in agreement, if the terms of it need to be revised because of a change – for example, one co-owner could pay off all or part of the mortgage and the shares in which the couple own the property should be changed to reflect this.
If you and your partner owned a property jointly before your marriage, it is important to review and resign it following your marriage to make it clear that your wishes still stand.
Wouldn’t everything be sorted out on divorce anyway?
In getting divorced, then an agreement would have to be reached as to how the assets of the marriage should be split – but usually, unless there is evidence to the contrary, the starting point is that the sale proceeds of the matrimonial home would be split 50-50.
This may well not suit or be fair in your particular situation and so it’s important to have a document in place which evidences your intention as to how you originally agreed the property would be divided.
Can you explain “tenants in common”?
There are two different ways of owning property jointly. Joint tenancy means that neither of the co-owners has a defined share in the property and on the death of the first to die, the property automatically passes to the surviving co-owner by what is called the right of survivorship.
Tenancy in common provides for you each to own a defined share in the property, which will pass on your death in accordance with the terms of your Will – and this form of ownership must be used in conjunction with a declaration of trust.
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