Declaration of trust in a property

[x5x3]

Person A and Person B have a Declaration of Trust drawn up to cover the purchase of property C. Each has a 50% share.

Person A dies and his will leaves everything to Person D.

What happens to the Declaration of Trust and does D now "own" 50% of Property C?

thanks in advance.

[anonymous-user]

x5x3 said:

Person A and Person B have a Declaration of Trust drawn up to cover the purchase of property C. Each has a 50% share.

Person A dies and his will leaves everything to Person D.

What happens to the Declaration of Trust and does D now "own" 50% of Property C?

thanks in advance.

Assuming A&B completed the purchase of the property before A died, yes. The declaration of trust severed what would otherwise have been a joint tenancy between A&B such that they became tenants in common. The key consequence of that is that on the death of A, A's interest in the property formed part of A's estate and passed under his will (or intestacy rules if there was no will), and did not pass to B under the principle of survivorship between joint tenants.

Technically it is a little bit more fiddly than that. There are two interests in a property: the legal interest (the person whose name is on a piece of paper that says they are the owner; the person who can deal with the property) and the beneficial interest (principally, the right to a financial share in the property).

A DoT carves up and defines who has what beneficial interest. It will also name usually who will be the legal owners.

So say A and B were the joint legal owners and A and B were 50/50 beneficial owners under the DoT. When A dies, his 50% beneficial interest passes to his heirs. But his share of the legal title passes to B, because a legal title can only be held on a joint tenancy, so survivorship applies to the passage of the legal title.

You end up therefore with B as the sole legal title holder - the only person who has their name on the paper title and the only person who can convey the property to someone on a sale and give good title is B. But B hold the property on a trust of land for him/herself and for A's estate in equal shares, and on a sale B must account to A's executor for the estate's share of the sale proceeds.

[x5x3]

thank you for the detailed reply!

[anonymous-user]

The key question for D, who now "owns" half the property even though it's registered in B's sole name, is whether D can force B to sell the property and pay D his 50% in cash. (Or alternatively require B to buy him out at 50% of market value.)

There's also the question of whether D has any right to live in the property.

The specific wording of the Deed of Trust should cover these matters.

[x5x3]

thanks for the replies - one further question.

If say in the original DoT, A agreed to a 5 year period whereby they could not force the sale of the property. At the end of those 5 years A and B want to agree to another 5 year period - does that require a new document or can some sort of side-agreement be added - and does this require a solicitor to draw up or is a simple "A and B hereby agree to another 5 year period, signed A and signed B " with witnesses type document ok?

[anonymous-user]

You can do a new Deed of Trust quite easily at any time. Best to use an expert so that nothing gets overlooked. You want to be 100% sure the new Deed is valid/enforceable and the old one properly revoked.

What if D must cash out, for instance to pay the inheritance tax on A's estate? A 5 year prohibition could be problematic under those circumstances.

[anonymous-user]

x5x3 said:

thanks for the replies - one further question.

If say in the original DoT, A agreed to a 5 year period whereby they could not force the sale of the property. At the end of those 5 years A and B want to agree to another 5 year period - does that require a new document or can some sort of side-agreement be added - and does this require a solicitor to draw up or is a simple "A and B hereby agree to another 5 year period, signed A and signed B " with witnesses type document ok?

The lazy answer is "use a further deed". You can amend a deed with a document that isn't a deed but there are some hoops to jump through. You could even possible alter the effect of a deed with words and conduct (an estoppel) though usually you will only find out if you've been successful after an expensive visit to Court. So it's simpler therefore to take the easier path and use a second deed. Get a solicitor to do it for the simple reason that (a) your chances of getting it right first time are better and (b) if it isn't right, you have bought the benefit of his insurance policy if there's a slip up.

[x5x3]

Thanks for the answers everyone.

[x5x3]

x5x3 said:

Person A and Person B have a Declaration of Trust drawn up to cover the purchase of property C. Each has a 50% share.

An update - this all went fine and a solicitor drew up the DoT.

Fast forward to today and Person A wants to buy out 50% of Person B's "share" of the property, and Person B has agreed to not force A to sell. i.e. after the event the ratio would be 75% A and 25% B.

I know there may be a CGT event for B depending on the £ values involved but I'm curious what else needs to be done.

1) cancel the existing DoT
2) create a new DoT

is it that simple, the term "transfer of beneficial interest" has been mentioned - is this required as well?