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Is your interest in your property protected in the event of a breakup?

25 October 2016

More than ever before couples are buying their first home together before marriage – with over 3.2 million cohabiting couples in the UK last year alone.

Buying a house together is an exciting time and nobody wants to ruin the romance by making provisions in case the relationship comes to end. However, the financial consequences can be severe if you have not taken the necessary steps to protect your interest in the property. The simplest and easiest way to do this is to create a declaration of trust between you and your partner.

What is a Declaration of Trust?

A Declaration of Trust is a binding contract which outlines the names of the parties who hold an interest in the property, along with the proportion of their share. These can be as simple or as complex as you require.

When would I need one?

There are two ways in which a property can be jointly owned:

  • Joint tenants – essentially this means that all owners own 100% of the property together, meaning neither owner has a separate share in the property. In the event of death, the surviving owner(s) will automatically own the whole of the property regardless of any wishes made in the Will of the diseased.
  • Tenants in common – compared to joint tenants, this type of ownership allows for specific/identifiable shares. If you have two owners and they each hold a 50% share in the property, if one dies, their share will pass to whoever they chose in their Will, rather than automatically to the other owner. It is crucial, therefore, that you have an up to date Will outlining who you want your share to go to in the event of your death – see link for more information.

Whenever a property is held as tenants in common, it is always advisable to have a Declaration of Trust in place to outline and protect your share in the property.

An example scenario of this might be:

  • You and your partner wish to jointly purchase a property as tenants in common, however, you are contributing £10,000 to the deposit and your partner is only contributing £5,000
  • 2 years down the line you unfortunately separate

What happens to your £10,000?

Another common scenario might be:

  • You and your partner wish to purchase a property, but you do not have an adequate enough credit rating to be a party to the mortgage
  • You do, however, contribute £10,000 towards a deposit
  • 2 years down the line you unfortunately separate

Again, what happens to your £10,000?

In both situations, without a Declaration of Trust, you would have no automatic right to your money and would, therefore, risk losing thousands of pounds. Equally, if the property is in your partner’s name and they pass away without making a Will, then it will fall to their next of kin. By putting a Declaration of Trust in place you are safeguarding your financial interest in the property and ensuring that, should anything happen, you are entitled to get your money back.

If you feel that you need to protect your interests and want that added peace of mind, then call Poole Alcock today at any of our Cheshire based offices. Our team of friendly specialist solicitors are on hand help you with the advice you need.

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