When Would You Need a Deed of Trust
If you're involved in property, asset management or estate planning, you might have come across the term Deed of Trust. A Deed of Trust, also commonly known as a Declaration of Trust or Floating Deed, is a legally binding document that outlines the ownership rights of joint property owners or joint tenants.
But when exactly would you need a Deed of Trust? Let’s find out - read on to find out what a Deed of Trust is, how to create one, and when you’d need one.
What Is a Deed of Trust?
A Deed of Trust is a legal document that sets out the terms and conditions for managing assets, property or investments. It creates a trust - a legal entity holding assets for specific individuals or beneficiaries. It's important to understand what a trust deed is and when you would need one:
Property Ownership
People often require a Deed of Trust when sharing property. This deed helps them officially agree on roles and ownership. Trust deeds are particularly useful as they prevent arguments from occurring further down the line between one party and another if the partnership ends. Whether you share a property with a family member or friend, having a Deed of Trust is most beneficial.
Estate Planning
Deeds of Trust are invaluable in estate planning. They allow a smooth transition of your assets to your loved ones when you pass away. You can establish a trust to hold assets, with a trustee to manage and distribute them according to your instructions.
Asset Protection
Protecting your assets is key, especially if you’re a business owner or high-net-worth individual. Having a Deed of Trust can be useful when you want to protect your assets. With your assets in a trust, you can:
- Shield them from potential creditors
- Protect them from legal disputes and unforeseen liabilities
Investment Management
Deeds of Trust are useful when people join forces to invest together. For example, a Deed of Trust can establish the investment rules for a group of people looking to invest in property or a business. They can specify details such as profit sharing and decision-making.
Why Would You Need a Deed of Trust?
In the UK, Deeds of Trust are primarily associated with property and ownership arrangements. Let's take a look at some specific situations where you might need a Deed of Trust.
Co-owning Property
When two or more people jointly buy a property, a Deed of Trust can specify ownership shares. This document states each person's financial contributions and what they can do as joint owners of the property.
Around 22% of couples who live together cohabit rather than get married - and trust deeds ensure that these couples are protected.
Inheritance Planning
In the UK, Deeds of Trust often facilitate estate planning. You can specify how you'll manage and distribute your assets to loved ones after passing.
Mortgages and Lender's
A mortgage lender uses a Deed of Trust to secure their interest in the property in the context of mortgage loans. This lets the lender take the property if the borrower doesn't pay the loan. Essentially, this provides an additional layer of security for the lender.
Asset Protection
Individuals who wish to protect their assets from potential legal claims or creditors should create a Deed of Trust. Creating a Deed of Trust maintains control while protecting assets from financial risks.
Business Partnerships
Business partnerships commonly use Deeds of Trust when multiple parties invest in a venture. The deed outlines each partner's responsibilities and designates who's in charge of various tasks. The partnership will also establish how it will divide assets if it concludes.
How to Create a Deed of Trust
There are several stages to go through if you require a Deed of Trust. Typically, the process involves the following key steps.
Consult a Legal Professional
Before creating a Deed of Trust, seek advice from an expert like Bell Lamb & Joynson to ensure it follows laws and regulations. Not following laws and regulations could lead to complications, such as your Deed of Trust being rectified by an order of the court. Seeking expert help ensures potential issues are avoided.
Define the Trust's Purpose
Clearly state the trust's purpose, whether for property ownership, estate planning, asset protection, and so on. It's vital to be very clear to avoid any misunderstandings or disputes regarding the trust.
Appoint a Trustee
A trustee manages the trust and assets. Choose a trustworthy individual or entity to fulfil this role, as they will gain power over your trust and assets.
Specify Beneficiaries
Identify the beneficiaries of the trust. These are the individuals or entities who will benefit from the trust assets.
Detail Terms and Conditions
Outline trust terms and conditions, including asset distribution and the rights and responsibilities of the parties involved. Again, it is very important to set the terms and conditions out clearly to avoid any uncertainties.
Sign and Execute
Once finalised, all parties must sign and execute the document according to legal requirements once they agree and finalise the document. Signatures are important to make the document legal on each person's behalf and to show the act of agreement.
Common Mistakes to Avoid
When creating a Deed of Trust, avoid common mistakes that could lead to legal complications or disputes. Here are some pitfalls to be aware of:
Incomplete or Ambiguous Terms
Vague or incomplete terms create confusion and conflict. Be precise and detailed in the document.
No Legal Counsel
Drafting a Deed of Trust without legal guidance risks errors not being apparent until problems arise. Legal counsel can help you work through the complex side of completing a Deed of Trust.
Lack of Regular Review
Situations change, so regularly check and revise the Deed of Trust. Doing this will ensure that it still matches your goals and current circumstances.
Inconsistent Execution
Ensure all parties sign and execute the document correctly. Inconsistent execution can invalidate the deed.
Put Your Trust in Bell Lamb & Joynson Today
A Deed of Trust is a valuable legal tool with diverse uses in property, estate planning and asset protection. In the UK, common uses include clarifying property ownership, estate planning and securing loans.
It’s important to speak with legal experts when it comes to dealing with Deeds of Trust. A member of our team can match your intentions while complying with the law. Remember to regularly update your Deed of Trust to safeguard your assets and meet your financial and legal goals.
Careful drafting offers clarity and peace of mind in personal, financial, and business affairs. Our experienced Conveyancing and private client team at Bell Lamb & Joynson will support you every step of the way, always prioritising your best interests while offering support and guidance along the way.
We work closely with clients, offering clear communication at all times. You can trust that there are no hidden legal fees; we'll provide you with all the relevant information you require. We're authorised and regulated by the Solicitors Regulation Authority of England and Wales.
Our firm has over a decade's worth of knowledge and experience. If you require further information about our services, please contact us today to reach one of our friendly experts.