Property + Trusts: The Bank of Mum and Dad

Recent data indicates there has been a significant increase in the number of first-time buyers relying on financial assistance from family and friends on securing their first property purchase. The so called “Bank of Mum and Dad”.

According to data from the English Housing Survey in 2022-23 the proportion of first-time buyers relying on the “Bank of Mum and Dad” stood at 37%. This is a notable increase on the previous year’s figures, which stood at 27%.

What is a Declaration of Trust?

This type of arrangement is often formalised by a Declaration of Trust. A Declaration of Trust is a legal document which confirms the terms upon which an asset, typically property, is held on trust. The document confirms the amount contributed by each individual, for what purpose, the share of the property owned by each party and how the proceeds will be distributed upon eventual sale. Other provisions can also be incorporated to meet specific circumstances.

A Declaration of Trust can also help avoid uncertainty and provide reassurance to the person/s (Mum and Dad) investing.

Does a Declaration of Trust create a “Trust”?

In England and Wales where property or land is jointly owned this creates a “trust of land”.

Broadly speaking, a Trust is a legal arrangement where a named party (Trustees) manage investments, money, land and building, etc, on behalf of named beneficiaries. A Trust Deed is a legal document which specifies the terms of the Trust. A Declaration of Trust is a type of Trust Deed.

Does this type of Trust arrangement require registration with HMRC?

TRS stands for the Trust Registration Service. TRS is a digital platform governed by HMRC to facilitate the formal registration of Trusts.
TRS was established by HMRC in 2017. Its key aim is to reduce the risk of trusts being used by criminals to launder money. Initially, only Trustees of “taxable trusts” were required to register via TRS.

However, the regulations were extended significantly to meet with the EU’s 5th Money Laundering Directive (5MLD). Consequently, most Trusts (unless an exclusion applies) in existence as at or post October 2020 now require registration via HMRC TRS.

HRMC are regularly amending their guidelines and trustees should always refer to the current guidance per the HMRC TRS Manual.

How can Thatcher + Hallam help?

Before entering into this type of arrangement it is advisable for all related parties to seek independent legal advice. There are a number of short and long term events and circumstances should be considered, from both a legal and practical perspective.

Please do not hesitate to get in touch with our team on 01761 414646 email enquiries@th-law.co.uk or send an enquiry through our website.
Alternatively, you may wish to attend to our Free Legal Advice Surgery which we run every Thursday from 5pm – 6pm at our Midsomer Norton office, near Bath. No appointment necessary, just turn up.