Declarations Of Trust: Ensuring fair property division in a divorce

A Declaration of Trust is a legally binding document which is signed as a deed. It is usually made at the time of purchasing a property and records the financial arrangements of all those who have an interest in the property. 

For example, the Declaration of Trust can detail who owns what share of the property, which is often reflective of one person contributing a greater proportion of the purchase price than the other. It can often detail what is to happen to the property in the event of various eventualities, such as if all owners agree to sell the property or if one owner wishes to buy out the other’s interest.

When is a Declaration of Trust frequently used?

Declarations of Trust are typically entered into when unmarried couples are purchasing a property, and they seek to set out how the money in the property should be divided upon sale in the event of their separation.

If you later marry or are already married and have a Declaration of Trust in place, the strength of the trust deed is considerably weakened as the rules under the Matrimonial Causes Act 1973 will take precedence. Upon divorce, the court will look at ‘all the circumstances of the case’, including the terms of any declaration of trust, as evidence of the couple’s intentions on how that property should be dealt with.

However, ultimately, the court’s starting point when seeking to divide assets upon divorce is an equal division of the matrimonial assets, with a departure from an equal division in order to ensure the parties' needs are met. Therefore, in most cases, the terms contained within the Declaration of Trust are likely to be outweighed by the parties' needs, and the court has no obligation to honour the terms of the declaration of trust. In most cases, the family home is central to the division of the assets upon divorce, and the court’s equal starting point for division will remain even where there is a Declaration of Trust in place. However, each case is specific, and there are other factors to consider, so it is recommended that you seek independent, specialist legal advice as to your circumstances.

If you intend to marry or have already married and you are seeking to protect the money you have invested into a property, it is advisable to have a pre-nuptial or post-nuptial agreement in place as opposed to a Declaration of Trust.

How much trust is involved?

A Declaration of Trust is usually created to safeguard the parties’ intentions regarding their finances in the future. The aim is to avoid any dispute arising at the end of the period of joint ownership of a property, for example, if the couple separates.

The benefit of entering into a Declaration of Trust is to provide safeguards by declaring the parties’ positions and intentions at the point of purchase of a property, which will undermine the possibility of a challenge in the future.

As a result, it is not easy to change or seek to overturn the terms of the Declaration of Trust once it has been entered into, unless by agreement of all parties. If so, the Declaration of Trust can be amended to reflect any new agreed arrangements. It is, therefore important that each individual entering into a Declaration of Trust receives their own specialist, independent legal advice as to the terms of the trust deed before signing.

In the event of a separation between an unmarried couple who jointly own a property with a Declaration of Trust in place, the court’s starting point will be to look at the terms of that Declaration of Trust and how the property should be dealt with, whether it be sold or if one owner wishes to buy out the other. Therefore, an element of trust is involved, as all parties need to agree to the terms of the Declaration of Trust before signing. Once signed, the Declaration of Trust is a legally binding document.

For help with a Declaration of Trust or any other queries concerning separation, whether you are married or unmarried, please contact one of the specialist family lawyers who can help guide you through the process. Call our on the number below for a free 15-minute telephone consultation in the first instance to discuss matters in further detail and see how we can help.