Where land or any other property is held by a legal owner for the benefit of another person (such as out of a Will or Estate, or by a parent for their child), the asset is held by a trustee on trust for a beneficiary and a property trust arises. It is essential to manage property trusts effectively and carefully as there are complicated obligations which the trustee must comply with including tax liabilities, observing of the best interests of the beneficiary and ensuring that conflicts of interests are avoided. Very often there will be more than one beneficiary and there should always be at least two trustees. Therefore there is an obligation to best balance the competing interests of the beneficiaries and for the trustees to ensure that their own interests do not conflict. The beneficiaries can also join together and demand of the trustees that certain actions are taken. We can help ensure that these obligations are properly complied with and that the trust is managed efficiently and successfully.
Property trusts also arise where more than one person owns a property jointly with another. The legal title will be owned by the two owners, but their respective interests in the property may be different. Depending on the owners’ respective interests in the property and how they would wish for their interests to be dealt with if one or both of them should die, the owners could hold their respective interests as joint tenants or as tenants in common. Very briefly, if the owners hold the property as joint tenants, their respective interests are equal and the interest in the property of the first owner to die passes automatically to the survivor outside the provisions of any will. If the owners hold as tenants in common, their respective interests may be equal or varied (depending on the owners’ wishes or actions) and the interests in the property pass under the owners’ wills or the rules of intestacy where there are no wills. If the owners wish to hold their interests in the property as tenants in common, then it is essential that they make wills and enter into a Declaration of Trust to expressly provide in what proportions they wish to hold their interests. In most conveyancing transactions the issues of property trusts will arise. We can advise to help you achieve the best solution available and ensure your peace of mind for the future.
We recommend the Law Society’s guide to setting up home with a partner.