A Declaration of Trust – why use one?
When two or more people purchase or contribute to a property, it’s important to be clear about who owns what—and how that should be handled if the property is later sold. A Declaration of Trust is a legal document that protects each party’s financial interest in the property and provides clarity for the future.
What Is a Declaration of Trust?
A Declaration of Trust (also known as a Deed of Trust) is a legally binding agreement that records the financial arrangements between individuals who jointly own or have an interest in a property. It is commonly used by:
- Couples buying together (especially where contributions are unequal)
- Friends or siblings co-owning a home
- Parents helping children with a deposit
- Property investors looking to define their interests clearly
This document provides a clear record of ownership, contribution, and expectations. It is especially crucial if the property is sold as a result of death of one of the parties or if circumstances change in the future, ie. divorce or separation.
How Sale Proceeds Can Be Divided
A Declaration of Trust can set out exactly how the net proceeds of sale (after repayment of any mortgage and sale-related expenses) should be divided. There are several ways this can be structured:
1. Fixed Shares
Each party receives a set percentage of the proceeds, reflecting their initial investment or agreed share (e.g. 60/40 split).
2. Variable (Floating) Shares
Ownership shares can be adjusted over time based on further contributions—for example, to the mortgage, renovation costs, or maintenance. This approach reflects the evolving financial input of each party.
3. A Combination of Fixed and Variable Shares
A hybrid model can be used—for instance, fixing repayment of the initial deposit in certain proportions, while allowing the equity growth to be shared based on an agreed formula.
Key Benefits of a Declaration of Trust
- Protects Unequal Contributions
Clearly records who has paid what and ensures that is reflected fairly upon sale or separation. - Reduces the Risk of Disputes
A written agreement avoids uncertainty and provides clarity if disputes arise in future. - Supports Estate Planning
A declaration can be coordinated with a Will to ensure your share passes according to your wishes—particularly important for cohabiting couples or unmarried co-owners. - Adaptable to Real Life
It can also include provisions about what happens if one party wants to sell, moves out, or contributes further funds down the line.
Why Legal Advice Matters
While there are online templates for Declarations of Trust, they rarely account for the unique details of each case. Professionally drafted documents ensure your intentions are properly reflected, legally enforceable, and tax-efficient.
In addition, where co-owners require independent legal advice, we are also able to provide this service. Independent legal advice is often required when there are unequal contributions or potential conflicts of interest—ensuring that all parties fully understand the implications of what they are signing.
About the Author
This article was written by Lanka Bandara, a Solicitor at The Burnside Partnership, who specialises in preparing and advising on Declarations of Trust. Lanka regularly advises clients on all aspects of co-ownership, including:
- Drafting bespoke Declarations of Trust
- Advising on the Income Tax, Capital Gains Tax, and Inheritance Tax implications of joint ownership arrangements
- Aligning declarations with estate planning and Wills
- Providing independent legal advice to co-owners where needed
How We Can Help
At The Burnside Partnership, we are experienced in helping clients structure and protect their property interests. Whether you are buying with a partner, supporting a family member, investing with others, or simply want peace of mind about your financial contribution, we’re here to assist.
Get in touch today to speak to Lanka Bandara or one of our team.