Declaration of Trust Beneficial Interest

Declaration of Trust: Record Beneficial Interest in a Property

A verified declaration of trust records who is entitled to a property, in what shares, and what happens to the money when it is sold. It is often used when people contribute different amounts to a purchase, or when the names on the title don't reflect who paid. Robot Lawyer drafts it as a deed from your answers, under the governing law you choose. On the Verified plan, a legal professional checks it before you sign it.

CONTENTS

What Is a Beneficial Interest in a Trust?

Owning property has two sides. The legal owner is the person named on the title, who can deal with the property, such as selling or mortgaging it. The beneficial owner is the person entitled to the benefit of it, such as the sale proceeds or rental income. Often they are the same people, but they don't have to be.

A beneficial interest is your share of that benefit. A declaration of trust records the beneficial interests in writing, so everyone knows what they are entitled to. The legal owners hold the property as trustees for the beneficiaries.

When Do You Need a Declaration of Trust?

• Unequal contributions
  You and a partner or friend are buying together, but one of you is paying more of the deposit or mortgage.
• Unmarried couples
  You live together and want your shares protected, as cohabiting partners often have fewer automatic rights than married couples.
• Family help
  A parent or relative is contributing money and you want to record whether it gives them a share.
• A property in one name
  Only one person is on the title, but someone else has paid towards it.
• Investment property
  Friends or family are buying a property together to rent out.
• Changing shares
  The owners have agreed to change their shares in an existing property.

If money from a relative is a loan rather than a share, a Loan Agreement may suit better. Lenders often ask about this too.

Joint Tenants vs Tenants in Common

In many common-law countries, co-owners hold the beneficial interest in one of two ways:

• Joint tenants
  Everyone owns the whole property together, without separate shares. If one owner dies, the property passes automatically to the survivors, whatever their will says.
• Tenants in common
  Each owner has a distinct share, which can be unequal. Each share passes under the owner's will or, if there is no will, under the intestacy rules.

A declaration of trust usually sets out shares as tenants in common. If you hold your share this way, make a Last Will and Testament so it passes to the people you choose.

What's Included in Your Declaration of Trust?

• The property
  Its address, description, whether it is freehold or leasehold and any title number.
• Trustees and beneficiaries
  The legal owners and the people beneficially entitled, who are often the same.
• The purchase
  The price, any contributions and any mortgage or loan.
• Beneficial shares
  Equal shares, fixed percentages, or distinct shares such as a deposit repaid first before the rest is split.
• Costs and income
  How mortgage payments, bills, repairs and any rental income are shared.
• Sale and buy-out
  When the property can be sold, how the proceeds are divided, and how one party can buy out another, including how the property is valued.
• Transfers
  What happens if a beneficiary wants to sell or transfer their share.
• Signing as a deed
  Signatures witnessed in the way the governing law requires.

How It Works in Different Countries

Some points apply almost everywhere. A trust over land usually has to be in writing and signed. A declaration of trust doesn't change your liability to a mortgage lender, so joint borrowers each remain responsible for the whole mortgage. And if co-owners later disagree about selling or living in the property, a clear written record of their shares helps a court and often avoids the dispute. Local rules then differ:

• UK
  In England and Wales, a declaration of trust over land must be evidenced in writing and signed (section 53(1)(b) of the Law of Property Act 1925), and is usually signed as a deed in front of a witness. Tenants in common can protect their shares with a restriction (Form A) on the Land Registry title. Scotland has a different system of property law.
• United States
  Co-owners usually hold as joint tenants with right of survivorship or as tenants in common, and some states have community property rules for married couples. Shares and arrangements are often recorded in a co-ownership or trust agreement.
• Ireland
  Joint tenancy and tenancy in common work in a similar way, and a written declaration of trust is commonly used to record unequal shares.
• Canada
  The common-law provinces use joint tenancy and tenancy in common, while Québec has its own civil-law rules on co-ownership.
• Australia
  Co-owners hold as joint tenants or tenants in common, and in some states a declaration of trust over property can attract stamp duty.

These notes are general, so check the signing, registration and tax rules where the property is.

How It Works on Robot Lawyer

1. Answer the questions
   Tell us about the property, the owners and beneficiaries, the purchase, any mortgage and how the shares, costs and sale should work.
2. Generate your deed
   We draft a clear deed of trust with defined terms and numbered clauses under the governing law.
3. Get it verified
   On the Verified plan, a qualified legal professional checks your declaration within 24 hours and makes amendments where needed. See how our documents are verified.
4. Sign and protect it
   Sign it in front of witnesses, give each party a copy and keep the original safe.

Declaration of Trust FAQs

What is a declaration of beneficial interest?

It is another name for a declaration of trust over property. It records who is beneficially entitled to the property and in what shares, separately from whose names are on the legal title.

Does a declaration of trust need to be witnessed?

It is normally signed as a deed, so each signature is witnessed. The exact formalities depend on the governing law, and your declaration includes a signing section that follows them.

Can I make a declaration of trust after buying a property?

Yes. You can make one at any time, for example when circumstances change or someone contributes more. Changing beneficial shares can have tax consequences, so take advice if money is changing hands or a mortgage is involved.

Should each person get independent advice?

It is sensible, especially where shares are unequal or one party is giving up rights. Independent advice also makes it harder for anyone to challenge the deed later.

Is a declaration of trust legally binding?

Yes, if it is properly made and signed. Courts generally give effect to a clear written declaration of the parties' shares.

What's the difference between a declaration of trust and a cohabitation agreement?

A declaration of trust deals with the beneficial ownership of a specific property. A Cohabitation Agreement covers wider arrangements between partners who live together, such as finances, belongings and children. Many couples use both.

Create a Verified Declaration of Trust

Record who owns what, clearly. Related documents: Cohabitation Agreement, Trust Agreement, Property Purchase Agreement and Last Will and Testament.