Declaration of Trust Query

I reside in a Property (Property A) with my parents. My name is solely on the mortgage/deeds as they were unable to secure a mortgage due to age/income, but the property is effectively funded by them (deposit and mortgage payments). I have received some advice that I can create a declaration of trust in which I declare that I am transferring the beneficial interest of Property A to my parents. This means although I will retain legal ownership and the mortgage would remain in my name, I can purchase and move into another Property (Property B) without being considered an additional property owner and not be subject to the 3% surcharge, as well as not incurring capital gains tax in Property A whilst my parents continue to live there.

Is this correct?

If so, will there be any capital gains/stamp duty payable upon the declaration of trust being formed and beneficial interest being transferred? Do I need to inform the current mortgage lender and could they disagree? If my parents passed away, would I revert to being the beneficial owner? If they passed away would there be IHT issues? Is there anything not considered that could cause further complications?

Dear Pebbles,

This is a complex technical question, for which I would suggest you seek specialist advice. There is risk attached to giving an incorrect answer and I don’t believe this forum is designed to give this level of technical answer.

Thanks Lucy. Can you shed any light on what type of specialist would be better placed to answer such a query? A specialist lawyer or accountant?

I suggest you might look to a member of the Society of Trust and Estate Practitioners (STEP). Its membership directory is: Members | STEP

You can use it to identify firms in your geographical area, perhaps specialising in Trust Planning and Administration

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

As mentioned by Paul STEP have a good list of potential options. It may be that you need a mix of both legal and tax advisers depending on the breadth of the firm you locate. Good luck.


I’m a little surprised at the posts by the above contributors declining to comment.

At its simplest if you are the sole legal and beneficial owner of A then you could execute a declaration of trust under which you effectively transfer/give the beneficial interest to your parents.

Once the beneficial interest is transferred you would not then be caught by the 3% SDLT surcharge if you purchase a residential property.

As you lived in A no CGT liability would arise on executing the declaration of trust.

Assuming that your parents under the declaration of trust do not assume liability for payment of the mortgage no SDLT should arise on the transfer. However, if under the declaration they do take on the mortgage liability SDLT may become payable (depend upon the amount involved).

On the parents death you will not automatically inherit. Who inherits will depend upon your parents’ wills.

Normally under the terms and conditions of a mortgage changes in the beneficial interests require notification to the mortgagee although in many cases such notifications are not given, the mortgagee having a legal charge over the property.

You state that your parents funded the initial deposit and all subsequent mortgage payments although not under any legal documentation… Was the initial understanding that the house was from the beginning to be that of your parents not yours? If so, then arguably the beneficial interest always resided with your parents and not you although you possess the legal interest/title.

Was any documentation put in place at the time to reflect this? If not, I would have thought that some sort of memorandum could be executed now confirming the initial understanding between you and parents which would involve no tax implications. Was the mortgage company appraised of this understanding?

As with all posts on this forum the poster would always be wise to take specific advice from a professional and not to simply rely exclusively on answers provided here.
Malcolm Finney

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Having read this latest post, it seems to me that the facts upon which the original arrangement were based might now be set aside in order to try and obtain what appears to be a tax advantage.

I suggest that this matter would better be dealt with formally via a suitable adviser, mindful that people from HMRC also access the forum.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

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Unfortunately there are clearly inconsistencies in your post. Either you own the property OR parents own the property. You cannot avoid the 3% SDLT surcharge by arguing you purchased and own the property yet at the same time you were in effect purchasing for your parents.

I note you also posted on taxationweb but included other information but still these inconsistencies I refer to persist.

Malcolm Finney