Deed of Trust: Secure your property investment

Deed of Trust is a legal agreement that outlines how a property is owned between joint owners. This document is often used to protect investments when owners contribute different amounts toward a property, or when a family member, such as a parent, contributes funds.

Common uses for a Deed of Trust:

• Deposit contributions: Detail how much each owner or third party contributed towards the property deposit.
• Mortgage repayments: Specify if owners will contribute unequally to mortgage payments and outline the percentage each will pay.
• Household expenses: Agree on how ongoing property costs, like bills and maintenance, will be shared.
• Transfer of ownership: A deed of trust can be used to change the beneficial ownership of a property without the need for a formal legal transfer. This can alter how profits are shared and taxed without altering the legal title. This arrangement can be utilised to optimise tax liabilities by redistributing income to a lower-rate taxpayer between owners.

Key benefits of a Deed of Trust

A Deed of Trust is particularly beneficial in these scenarios:

• Joint ownership with unequal contributions: When purchasing a property with unequal contributions to the purchase price.
• Tax planning tool: A deed of trust between spouses can be an effective tool for tax planning, allowing couples to allocate property income in a way that maximises their tax position. By distributing profits so the lower-rate taxpayer receives a larger share, they can potentially reduce their overall tax liability on rental income.
• Buying out a co-owner: Allowing the purchase of a co-owner’s share without needing to remortgage.
• Protecting family investments: Safeguarding contributions from family members towards a property purchase.

Who can witness a Deed of Trust?

For a Deed of Trust to be legally binding, a witness is required during signing. The witness must:

• Be an adult
• Not be related to any party involved in the transaction
• Be of sound mind

Should you inform your mortgage lender about a Deed of Trust?

When using a deed of trust to change beneficial ownership, it's essential to inform any lender as it may affect the mortgage terms. Transparency with the lender ensures all changes are made in compliance with your loan agreement, avoiding potential breaches or disputes.