Jason Barnett - Partner, Coles Miller

Why The Bank Of Mum And Dad Needs A Declaration Of Trust30th Sep 2014

by Jason Barnett on 30th Sep 2014

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Young couples setting up home together are increasingly having to depend on the ‘Bank of Mum and Dad’ to help fund their mortgage deposit.Jason Barnett - Partner, Coles Miller

Faced with finding a deposit of £20,000, many first-time buyers suddenly become quite well versed in the tax rules and benefits surrounding gifts and Inheritance Tax!

But there’s a bit more to it than that. As more parents help their children to fund deposits, so the need for Declaration of Trusts has increased.

Put simply, a Declaration of Trust is a legal document which sets out who owns what when a property is held in joint names.

This is important in case the relationship breaks down and the couple splits up.

Here’s a scenario: a cohabiting couple have been given £10,000 by one set of parents. So far so good…

But a few years down the line, the rows start and the relationship ends. It’s time for the couple to start dividing up their assets.

Without a Declaration of Trust, the £10,000 given by one set of parents will get lumped in with everything else to be split down the middle.

Having a properly drawn up Declaration of Trust ringfences the £10,000 so that half of it does not pass to the other party. It is earmarked for a nominated recipient.

Even more importantly, if couples are putting different shares into the purchase of the property – rather than 50/50 – a trust deed can safeguard each party’s share of the equity.

The benefits are obvious. Declarations of Trust remove uncertainty, protect equity, reduce stress and the threat of costly legal disputes. Find out more about them here.

But there is no one-size-fits-all. Each document must be tailored to the circumstances of the individuals. Some cases are more complex than others.

So it is absolutely essential to use a solicitor with specialist experience in this area of the law.

Coles Miller can help with all aspects of moving house – including conveyancing, Declarations of Trust, shared ownership and remortgaging.

For expert advice, contact Coles Miller Partner Jason Barnett, 01202 293226.