DEFINITION of 'Declaration Of Trust'

A declaration of trust is a usually a document or oral statement indicating a property is being held for the benefit of another person or individuals. The trust grantor transfers this property as well as designated assets such as cash and securities into a trust. An appointed trustee such as an individual or financial institution administers this trust in the best interests of beneficiaries as explained in the declaration of trust.

BREAKING DOWN 'Declaration Of Trust'

A declaration of trust outlines who the trust is in benefit of, who can amend or revoke the trust (if it can be amended at all), who will serve as trustee and what powers the trustee holds. The statement also includes information regarding what is to happen if a beneficiary wants to receive distributions. It can also highlight details about the types of assets within a trust. 

The declaration also presents the trust's purpose or objectives and how the trustee may invest and manage assets to support beneficiaries. It also may explain who will replace the trustee in the event of illness, incapacitation, death or any other reason such as resulting legal action taken against the trustee. 

A declaration of trust is not required to be made in writing, but it often is. Some states require the declaration to be made in writing, while other states allow oral declarations to be made. State law also governs how a declaration of trust is applied to all those involved in the operation of the trust including grantors, trustees and beneficiaries. 

Declaration of Trust in the U.K. 

A declaration of trust in the U.K. establishes true ownership of a property being held for the benefit of one or more other individuals. It is governed by The Trustee Act 2000. With a declaration of trust, an individual can be treated as a property's owner even if he or she is not designated in the land registry as the property owner. The trust itself can be indicated in the land registry to show that the listed owner is not the sole owner of the property. 

For example, someone can purchase a home with a mortgage and the help from other investors such as the individual's parents. The parents would cover some or all of the purchase price with the agreement that they will benefit from an agreed upon share of any profit generated from the property. The person creating the declaration of trust would be the registered owner on the title deeds of the property, but the parents can register their interests on the trust deed.

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