When an unmarried couple purchase a property together, it may be the case that they will make unequal contributions to the purchase price. If they wish to recognise these contributions, they will need to enter into a Declaration of Trust.
What is a Declaration of Trust?
A Declaration of Trust is a document which contains details of how the proceeds will be divided if the property is sold in the future. It can reflect the contributions made to the initial purchase of the property, payment of the mortgage, and other expenses such as renovation costs. It can be tailored in a bespoke fashion to meet the parties’ intentions.
Without an express Declaration of Trust, they will be held to own the property in equal shares and will not be able to argue that their unmatched contributions should be reflected in the division of the proceeds in a subsequent sale.
How does marriage affect a Declaration of Trust?
The Declaration of Trust is executed as a Deed and will often be binding on the parties as an unmarried couple, except for in very particular circumstances (which is beyond the scope of this article.) However, if the parties subsequently marry or enter into a civil partnership, the Declaration of Trust is not treated in quite the same way. Upon a dissolution of their marriage or partnership, it can come as a surprise that the Declaration of Trust is not legally binding in the way they understood it to be. The matrimonial court does not need to be bound by the terms of this Deed and the terms agreed can be entirely disregarded by the court when they make decisions about how the matrimonial assets are to be split. While it may have evidential value, if the Deed relates to the parties’ matrimonial home, it will have limited impact. Similarly, even if relating to an additional property held by the parties, the court can determine that there should be an equal sharing of that property or even transferred outright to one party to meet their needs.
The matrimonial court can depart from any existing agreement entered into before marriage if the parties’ needs mean that they are justified to do so. Further, a Declaration of Trust is not the same as a Pre-Nuptial Agreement which is entered into with the intent of marriage.
Getting legal advice
If you are considering entering into a Declaration of Trust, we recommend seeking advice from a family solicitor as they can best advise on how your agreement may be treated in the future. If you have an existing Declaration of Trust in place and you are thinking about getting married or entering into a civil partnership, it is important to understand the implications of doing so. We recommend that you do so sooner rather than later to avoid any last minute pre-wedding panic.
A solicitor can also advise on what you can do to further protect your interests on marriage or civil partnership, specifically with reference to a Pre-Nuptial Agreement, or even a Post-Nuptial Agreement if you are already married.
For more information in relation to setting up a Declaration of Trust or advice on an issue with an existing one, please contact Caroline at caroline.keeley@twmsolicitors.com.
For further details about our Family and Matrimonial services services, click here.
