What Is a Declaration of Trust?
Let me explain what a declaration of trust is under U.S. law—it's essentially a document or even an oral statement that appoints a trustee to oversee assets held in a trust for the benefit of one or more other individuals.
This document or statement also lays out the details of the trust's purpose, its beneficiaries, and how the trustee will manage it. You might hear it called a nominee declaration sometimes.
Understanding a Declaration of Trust
A declaration of trust doesn't just appoint a trustee; it defines the trust in considerable detail. It identifies the assets held within the trust, states who will benefit from it, and specifies who can amend or revoke the trust, along with the trustee's name and powers—the trustee could be a financial institution, not necessarily an individual.
The statement may include instructions on how and when beneficiaries receive distributions. It provides an overview of the trust's purpose or objectives and how the trustee can invest and manage assets to support the beneficiaries. It also might explain who replaces the trustee if they become ill, incapacitated, die, or for any other reason.
State Laws Differ
You should know that state laws vary—some require a declaration of trust to be in writing, while others allow oral declarations. These laws also govern how the declaration applies to everyone involved, including grantors, trustees, and beneficiaries.
Key Takeaways
- A declaration of trust, or nominee declaration, appoints a trustee to oversee assets for the benefit of another person or people.
- The declaration describes the assets held in the trust and how they are to be managed.
- State laws have different requirements for creating a declaration of trust.
Declaration of Trust in the U.K.
In the U.K., a declaration of trust means something different—it establishes joint ownership of a property held for the benefit of one or more individuals other than the official owner, and it's governed by the Trustee Act of 2000.
Importantly, the U.S. and U.K. have distinct definitions for this term. With a declaration of trust, an individual may be regarded as the owner of a property even if not designated as such in the land registry—the trust can be cited in the registry to show that the listed owner isn't the sole owner.
For example, if you purchase a home with a mortgage and your parents contribute some money toward the purchase, agreeing to receive a share of any profit from the sale, you as the registered owner on the title deeds would create the declaration, but your parents can register their interests on the trust deed.
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