June 2020

WHAT IS A DEED OF TRUST? A Deed of Trust is a document which can be used to define a part ownership share in an asset such as a property. This document is often created when two people purchase a property and one of them contributes more than the other toward the purchase price. This is a complicated-sounding document that is much more used in these circumstances, so a proper explanation will help all of us understand what it does. Why a Deed of Trust? There are many numbers of reasons for making a Deed of Trust but some of the most common ones are in respect of property, and the most usual uses are:- In some instances, if another person, say for example a parent or relative has provided the deposit for a new house and it is not intended to be a gift. They may wish to retain an interest in the property until it is sold at some future date. Their name does not need to be noted on the deeds but their financial interest in the property is secured by the Deed of Trust. On the other hand, if you are buying your house but are cohabiting, it is highly recommended that a Deed of Trust is drafted in anticipation of the move in together. This is particularly important if one person is putting in a larger investment than the other. The Deed can be written in many ways, it could just show who paid what sum into the initial purchase and therefore who owns what proportion. Additionally, the Deed can also state how the balance is distributed when the property is sold over and above the repayment to each party of the original investment made. It makes for clarity upon the sale of the house. As a consequence or in anticipation of making an investment in a property with a friend or business partner it would be prudent to have a Deed of Trust drawn up. You may be contributing to the cost of a property being renovated, for example, but you didn’t actually own it. The Deed could offer clarity on what happens when the property is sold, thus protecting your investment. WHAT SHOULD A DEED OF TRUST SAY The Documents can be very simple or may need to be more complex depending on the circumstances the Deed is being drafted to cover. Indeed, there are 7 basic circumstances which would justify the need for a Deed of Trust:- The details of the deposit paid when there is more than one person contributing towards it. When there are two or more people paying the mortgage repayments, whether or not the repayments are equally shared between them or not, all of this information needs to be detailed in the Deed of Trust. To ensure that down the line when the property is being sold, details how the equity in the property should be split between the parties. In the situation where one party wishes to sell the property but the other party either does not want to sell or wishes to buy out the other person’s share. In this scenario, the Deed can make clear what happens in these circumstances. In the event of the death of one of the parties, what happens to that party’s share and what is the other party's position? Can they stay in the house or must they allow a sale to proceed? All of these difficult questions can be answered by the detail inserted in the Deed. Finally a scenario that often takes place over time can be accounted for, such as the arrival of a baby, a job change, job loss causing a change in the financial circumstances of one of the parties. In any of the instances above, without a Deed of Trust in place there can uncertainties or future difficulties, all of which can be stressful, time-consuming, and costly to remedy. WHAT IS ESTATE PLANNING? As a future planning tool, a well-drafted will through to the right type of Trust can ensure that any future uncertainties are being planned for providing both you and your loved ones with peace of mind both now and in the future. There are many types of trusts but there are two more notable ones in respect of estate planning, the revocable and irrevocable trust. Either trust has a place in good estate planning but there are two main differences between them. With a revocable trust, often called a ‘living trust,’ the terms of the trust can be changed at any time, whereas the irrevocable trust can only be changed if all of the people who benefit from it agree. From an estate planning point of view, the revocable trust has the advantage to the owner of the assets that the terms of the trust can be changed, thus giving flexibility to the trust. The revocable trust also allows for the retention of some control over the assets by the owner, this may be an important factor to them. It is noteworthy, however, that the assets in the trust cannot be protected from their bankruptcy. On the other hand with irrevocable trust the owner of the assets gives up all rights of ownership over the assets. Irrevocable trusts can be used as tax planning vehicle by removing assets from a person’s estate thus removing a tax liability. It can also remove the income generated by the assets. These trusts can become quite complicated and require serious legal advice to ensure they are written correctly. The intention of the trust must be clearly identified and correctly detailed in the document. WRITING A WILL Known to most, a will is a document that many people put off writing. This is not surprising as most people do not like to think of their own death and therefore how to dispose of their assets. It is not always clearly understood but a will can be a large part of most peoples’ estate planning and should not be overlooked in its importance. What must be written in a will? Some things must be in a will, for example, if you are a parent of a young child, you should deal with guardianship. Without this information, the child may go to a person you would not have chosen to look after him or her. It could be that a dispute may arise if two or more people feel they should have the care and control of your child. If you choose a guardian and set out the details in your will your wishes should be respected in the event of your death. Writing a will is also the simplest and easiest way to ensure that any remaining assets are dealt with and distributed as you would wish, upon your death. In addition, the will must be clear what the asset is and what is intended in their disposition. Loose descriptions could otherwise lead to disputes between beneficiaries at a time which is already stressful. The distribution of ‘Real property’, in your will deals with your home and any other property you own at the time of your death, as opposed to items such as cars, jewelry, investments or bank accounts. With this aspect of a will the utmost care should be taken to ensure it is properly written so that those you intend receive these assets actually do so. I NEED A DEED OF TRUST OR WILL, WHAT NEXT? We would love to assist you. Our team of expert Wills lawyers would be happy to assist you. Please contact our team on 0800 799 9892 to speak to us about your circumstances and a free, no-obligation quote.

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