Declaration of trust- is it needed???

arwalder

Was wondering if anyone could help…….
My parents are very kindly putting down the deposit on the purchase of our house. So to protect their interest in the house if we were to both die we got our wills drawn up. We are also in the process of taking out decreasing term Assurance to cover the mortgage we have taken out if one or both of us die.
The solicitor contacted me today to suggest we have a Declaration of Trust agreement drawn up in addition to the will. I’ve had a quick look into it but so far as I can see we have covered the major eventualities I was just wondering if anyone thought this was a necessary step?
Thanks.

lisyloo

If you both died together then would your joint insurance and assets (include any lump sums from person pensions here) exceed the inheritance tax nil rate band.

I believe this is £325K each.
Bear in mind however that one of you could die first, pass assets to the other and then on second death you only have one allowance.

So would the total insurance payout plus any pension payouts excess £325K?

If it does then it's worth doing the trust so that the money is outside of this allowance, otherwise your parents (or whoever) will lose 40% of your money.

If you don't do it now, then the problem is you may forget in future and in a decades time you might have a 6 figure sum in house equity and also pension funds.
So my view is that if it's only a case of filling out a form, then it's easiest to do it now.

I'm not sure exactly what your solicitor is suggesting, but the simplest way might be to get your insurance put in trust. This would involved filling in a form from your insurer and would cost very little.
If your solicitor is suggesting something more extensive then that may cost you money in solicitors fees.

So you could consider just doing your life policy as it's relatively siple and cheap.
You may also be able to do the same with any private personal pensions you have (I've done some of mine).

dzug1

From your parents' point of view, yes.

It protects their interest if you change your will, divorce, remarry, etc

arwalder

The estate would not exceed the inheritance tax threshold if both or one of us died. I will definitely get the assurance written in trust. The solicitor was looking to charge £100 + vat for the service.
So as long as my parents are satisfied with the measures in place to protect their investment I will leave it there. If any of our circumstances change we will review the wills. Thanks for the advice

dunstonh

The solicitor was looking to charge £100 + vat for the service.

Sounds about right and fair. The fee is not in the admin but in the knowledge and the liability for advice.

stephenni1971

lisyloo wrote: »

If you both died together then would your joint insurance and assets (include any lump sums from person pensions here) exceed the inheritance tax nil rate band.

I believe this is £325K each.
Bear in mind however that one of you could die first, pass assets to the other and then on second death you only have one allowance.

So would the total insurance payout plus any pension payouts excess £325K?

If it does then it's worth doing the trust so that the money is outside of this allowance, otherwise your parents (or whoever) will lose 40% of your money.

If you don't do it now, then the problem is you may forget in future and in a decades time you might have a 6 figure sum in house equity and also pension funds.
So my view is that if it's only a case of filling out a form, then it's easiest to do it now.

I'm not sure exactly what your solicitor is suggesting, but the simplest way might be to get your insurance put in trust. This would involved filling in a form from your insurer and would cost very little.
If your solicitor is suggesting something more extensive then that may cost you money in solicitors fees.

So you could consider just doing your life policy as it's relatively siple and cheap.
You may also be able to do the same with any private personal pensions you have (I've done some of mine).

Lisyloo -

I think in this instance the Declaration of Trust is not a Trust for the insurance policy, but a legal document stating who has what share of the property.


So if the OP's parents put up the funds for 30% of the house, the declaration of trust would then confirm their interest regardless of what other circumstances may be. This is usually if the property is not going to be held on a Joint Tenacy but as Tenants In Common.

Baggysdad

Is the money a gift or a loan?

If its a loan - ie they would want it back at some point, then a Declaration of Trust is an excellent suggestion since it sets out the size and the source of your parents share of the house as security for the loan.

The downside of this is that your parents own a share of your house and if they went into care, this would form part of their assessable assets. It also forms part of their estate for inheritance tax.

If it is a gift - then accept it with thanks and that's the end of it.

The downside is that if you die and you leave your share of the house to your spouse/partner (or they inherit it as the surviving joint owner) they can then remarry or make a new will later leaving the house (including the share paid for by your parents) to someone outside of the family. If you were to split up, as there is no documentation confirming your parents interest in the property, they would loose that and it would be 'up for grabs' in any settlement.

It depends on how badly your parents want to secure their investment in your purchase. £100 is a fair price to pay for such a document.