Purchasing your first home is an exciting and significant milestone, but it also comes with a range of financial and legal responsibilities. As a first-time home buyer, you may be focusing on securing the best mortgage rate, finding the perfect property, and preparing for moving day. However, there are important legal considerations that should not be overlooked, particularly when it comes to Wills and Declarations of Trust.
Whether you're buying a home alone, with a partner, as joint owners, or as a married couple, understanding the importance of these legal documents is crucial for protecting your interests and ensuring that your wishes are respected in the event of unforeseen circumstances, such as illness or death.
In this article, we will explore why Wills and Declarations of Trust are vital for first-time home buyers in England and Wales, regardless of your relationship status, and offer advice on how to navigate these legal protections.
A Will is a legal document that outlines how your property, assets, and belongings will be distributed after your death. Without a Will, your estate will be divided according to the laws of intestacy, which may not reflect your wishes. For homeowners, having a Will in place is particularly important as it helps ensure that your home and any other assets are passed on according to your wishes.
In England and Wales, cohabiting couples do not have the same automatic inheritance rights as married couples or civil partners. If one of you dies without a Will, the surviving partner may not inherit anything, even if you jointly own the property. This can leave your partner in a vulnerable position, especially if the deceased partner has children or other family members who may inherit instead. A Will ensures that your share of the property, and other assets, go to the person you choose.
Additionally, for cohabiting couples, it is important to specify whether the property is owned as joint tenants (where the surviving partner automatically inherits the deceased’s share) or tenants in common (where each partner owns a specific share of the property). Without a Will, this distinction could lead to disputes or complications.
If you and another person own a property together, the way the property is owned will influence what happens if one of you passes away. The two most common forms of joint ownership are joint tenancy and tenancy in common:
• Joint Tenancy: If the property is owned as joint tenants, the property will automatically pass to the surviving owner upon death, regardless of what is stated in a Will. However, this only applies to the property itself. Other assets like savings, investments, or personal belongings may be distributed according to intestacy rules, unless specified in a Will.
• Tenancy in Common: In this form of ownership, each person owns a specific share of the property (e.g., 50/50 or a different split). If one of you dies, your share of the property will pass according to the instructions in your Will. Without a Will, your share could pass to someone you may not have intended, such as a relative.
If you're married or in a civil partnership, your spouse or partner automatically inherits from you if you die intestate (without a Will). However, this may not cover all of your wishes or all of your estate. For example, you might have children from a previous relationship, or you may wish to leave specific assets or parts of your estate to family members, friends, or charities. A Will ensures that your wishes are clearly communicated and legally binding, preventing any confusion or potential disputes among family members.
A Declaration of Trust is a legal document that sets out how you and your co-owner (whether a partner, friend, or family member) will share the ownership of a property. It is particularly important if you are not married or in a civil partnership, as it clarifies the financial and ownership arrangements of the property.
While a Will deals with the distribution of your estate after death, a Declaration of Trust deals with the ownership and financial rights of the property during your lifetime. It is vital for ensuring that everyone’s interests are clearly defined, especially in situations where the contributions to the property purchase or maintenance may not be equal.
1. Clarifying Ownership Shares: If you and your partner, or another individual, are contributing different amounts of money towards the purchase price or mortgage, a Declaration of Trust helps to outline each person’s share in the property. For example, one person might contribute more to the deposit or mortgage payments, and the Declaration of Trust ensures this is formally acknowledged. Without a Declaration of Trust, there may be confusion or disputes if the property is sold, or if one person wishes to buy out the other in the future.
2. Protecting Financial Interests: In situations where one person is contributing more financially to the property, a Declaration of Trust protects their investment by specifying their entitlement to a greater share of the proceeds if the property is sold or if the ownership arrangement changes.
3. Addressing Future Changes: Life events such as the birth of children, a change in income, or a shift in one partner’s financial situation may warrant an update to the Declaration of Trust. By having this document in place, you can ensure that the property’s ownership and responsibilities are clear and legally protected.
4. Preventing Disputes: If the relationship breaks down, having a Declaration of Trust can prevent lengthy disputes over the property’s ownership. It acts as a formal agreement that can help resolve issues without the need for costly and time-consuming litigation.
If you're cohabiting, a Declaration of Trust is especially important. In the event of a relationship breakdown or if one partner passes away, having a clear legal agreement regarding the property’s ownership can protect both parties and prevent costly disputes.
Even if you are married or in a civil partnership, a Declaration of Trust can be useful. If you’re purchasing a home together and contributing unequally to the deposit or mortgage payments, a Declaration of Trust clarifies the financial arrangements and prevents misunderstandings or future complications.
As a first-time home buyer, you should consider taking the following steps to ensure your property and financial interests are well-protected:
1. Create a Will: Whether you are cohabiting, married, or buying with a friend or family member, creating a Will is essential to ensure your property and assets are distributed according to your wishes. Consider seeking professional advice to ensure your Will is legally valid and properly reflects your intentions.
2. Draft a Declaration of Trust: If you are buying a property with someone else, consider having a Declaration of Trust in place to define each person’s financial contribution, ownership share, and rights to the property. This document can help avoid misunderstandings and disputes down the line.
3. Review Regularly: Your circumstances may change over time—whether it’s a new partner, children, a change in income, or a move to a different property. Regularly review and update your Will and Declaration of Trust to ensure they continue to reflect your wishes and protect your interests.
4. Consult a Solicitor: Legal advice is invaluable when it comes to drafting a Will or Declaration of Trust. A solicitor can ensure that both documents are correctly drafted, legally enforceable, and tailored to your specific situation.
As a first-time home buyer in England and Wales, it's important to look beyond the excitement of purchasing your property and think about the future. Having a Will and a Declaration of Trust in place provides peace of mind and ensures that your financial interests, property, and loved ones are protected. Whether you're cohabiting, jointly owning with a partner or family member, or married, these documents safeguard your rights and clarify your intentions in case of unforeseen events. Taking the time to get these legal protections in place now will save you time, money, and stress in the long run.
This is a highly complex area of law, to find out how best to navigate this you should see a specialist solicitor who specialises in Wills and Declarations of Trust.
For further information, please contact either one of our specialists in the experienced Private Client team using the contact details below:
David Roper on 01489 864 754 or david.roper@lawcomm.co.uk
Shaun Visser on 01489 864 173 or shaun.visser@lawcomm.co.uk
Jay Woodward on 01489 864 189 or jay.woodward@lawcomm.co.uk
