2 – Protecting your investment in your parents’ home:
Another common use is where parents are offered the opportunity to purchase their council-owned home under a right to buy scheme. Often parents cannot afford the cost themselves, so their children pay for the house.
This is potentially very risky for the children. What if the parents go into care? The property could be sold to pay for care fees, and if the children have actually bought the house with their own money they will need evidence of this otherwise they could lose their money.
The simple way to protect the unprotected money in both examples is by making a Declaration of Trust. The Trust states what will happen to the sale proceeds when and if the property is sold.
Let’s say Mr. Jones is buying a house with Miss Smith. He is putting down a 10% deposit of £10,000. If Mr. Jones and Miss Smith later split up, Mr. Smith may lose his £10,000. But if he creates a Declaration of Trust, protecting his money, he should get his £10,000 back when and if the property is sold and then any remaining equity in the property can be split equally between him and Miss Smith.
Declarations of Trust can be set up quickly and at very little expense, and give everyone peace of mind.
I’ve done a few blogs on Trusts, including “Watching the descendants for the wrong reasons“, “Nursing home fees“, and “Unregulated Will writers and property Will trusts“