
With a Declaration of Trust it is important to seek legal advice on when and how to properly document, by a declaration of trust, an intention by a legal owner to hold their beneficial interest (“the equity”) in a property on trust for others. The time to do so might be at the time of a property purchase or perhaps at any time when circumstances arise to give such an intention, such as upon marriage, rather than when facing financial difficulties. This was demonstrated in the recent High Court decision in the matter of Wade v Singh [2024] EWHC 1203 (Ch).
The case concerned an action taken by liquidators to challenge the validity of a declaration of trust entered into by the former director of the liquidated company in relation to the matrimonial home, after the company had gone into liquidation and at a time when he was facing claims from HMRC and the liquidators.
The court held that the written declaration of trust did not document a trust which was already informally in place, as argued by the director. Rather, the court held that the declaration of trust amounted to the director disposing of his beneficial interest at the time the declaration of trust was entered into.
Given the the time the declaration of trust was entered into, the liquidators were successful in persuading the court to set aside the declaration of trust under section 423 of the Insolvency Act 1986, as a transaction entered into with a view of putting the director’s asset out of reach of creditors.