Declaration of Trust with Right of Occupation

I am advising a client who created a declaration of trust with her husband in 2011, over their jointly owned home. This provided that they held the property as tenants in common in equal shares, but on death of one of them, the survivor could remain living in the property, and require the trustees to use sale proceeds of the property to purchase a replacement property. Surplus proceeds would pass to the estate of deceased husband and my client equally.

Husband died in 2016 and client is wishing to move home, using most of the sale proceeds of the property to do so.

I think the provisions go further than a bare trust as the trustees must use the sale proceeds for the benefit of the survivor if they require this.

If this is not a bare trust presumably it would fall under the relevant property tax regime. Would the 10 year anniversary date from 2011, or 2016?

Is this not the same as a life interest trust created under a will on first death?

Thank you for your response. As far as I can see from the legislation, an IPDI can only be created via a Will or intestacy. If I’ve missed something, that would solve my issue.

It seems to me that the DOT is testamentary as regards what is to happen to the husband’s share after his death and thus cannot govern that unless executed with the formalities required by the Wills Act. His share devolves per his Will or intestacy.

Jack Harper

Typically, I would have expected the respective wills of each spouse to provide for how their share of the property was to be dealt with on death.

I’m not sure that putting in the provisions as indicated in the DoT as to what will happen in the future on death of one of the spouses does not amount to a form of testamentary provision.

If, however, the DoT provisions are effective I would suggest the trust would be a relevant property trust (not a bare trust).

Malcolm Finney

Thank you all for your comments so far. The declaration of trust was executed on the same day as the husband’s Will - both were drafted by the same solicitors (not my firm) and the Will leaves the husband’s estate to his children. The intention appears to have been that the declaration of trust dealt with the husband’s share in the property and worked to complement the terms of the Will. I am not sure when a trust becomes “testamentary” - if anyone can suggest further reading on that point I would be grateful!

Further to Jack’s thought, do the terms of the DoT not provide evidence of the parties’ intentions and the purposes of the trust [of land]?
So whilst the children inherited H’s share of the property under his will, the trustees [of land] are entitled to restrict occupation to W under ss.12 & 13 ToLATA, with or without compensation, at least until the property is sold. I feel it plausible that the trustees may feel entitled to extend this to at least part of the proceeds of sale if immediately used to acquire another property, but would be more cautious unless the children are all known to be agreeable.

This was relevant property trust and the ten year charge is this year. Each settler also has a reservation of benefit, which would have been chargeable on death of H in respect of his share.

No cgt uplift on either death and the respective shares presumably revert to the respective estates on termination.

Simon northcott

I do not follow how an inter vivos Declaration of Trust can “work to complement the terms of the Will”. Is the husband’s share of the property validly disposed of inter vivos immediately by the DoT and so does not form part of his estate devolving under his Will? Although Clarity may not be a silver bullet for the pandemic it may be here

Jack Harper

The whole property appears to have been settled in 2011, so is now not part of either estate apart from fir iht purposes as a result of the GWROBs

Simon Northcott