When navigating the complexities of divorce, financial settlements often take centre stage. Among the various tools used to establish the division of assets, a Declaration of Trust can be an important document, particularly when it comes to property ownership. But how enforceable is a Declaration of Trust in the context of a divorce?
What is a Declaration of Trust?
A Declaration of Trust is a legal document that outlines how ownership of a particular asset, such as a property, is divided between two or more parties. It’s commonly used by co-owners (including married couples or unmarried partners) to formalise each person’s share or interest in the property. This document is especially helpful when there’s a need to clarify each party’s financial contribution and ownership rights.
In divorce proceedings, a Declaration of Trust can have significant implications, particularly when it comes to the division of property and other assets. But is it automatically enforceable in court?
Clarity and specificity matter
The more clear and specific a Declaration of Trust is, the more likely it is to be enforceable. The document should clearly define each party’s share in the property or asset. For example, it may specify that one party owns 60% of a house while the other owns 40%. A detailed, well-drafted Declaration reduces ambiguity and provides a clearer picture of the parties’ intentions.
Proper execution is key
For a Declaration of Trust to hold up in divorce proceedings, it needs to be properly executed. This means that both parties should sign the document, ideally in front of a witness, to ensure its legal validity. If the document is informal, unsigned, or lacks the necessary legal formalities, a court may be less inclined to enforce it.
Full financial disclosure
Transparency is crucial when creating a Declaration of Trust. Both parties must disclose all relevant financial information to ensure the agreement is fair. If one party hides assets or fails to provide a complete financial disclosure, the Declaration may be deemed invalid or challenged in court. In divorce cases, the court expects honesty, and a lack of disclosure can lead to serious consequences.
Equity and fairness are priority
Even if a Declaration of Trust is well-written, the courts in the Auckland prioritise fairness. If the terms of the Declaration are deemed unfair or inequitable to one of the parties, the court may override it. For example, if circumstances have changed since the Declaration was made—such as one party having significantly increased their contribution to the property or family—the court may adjust the division of assets accordingly.
What about changes in circumstances?
Life can change rapidly, and sometimes those changes affect the financial situation of the parties involved. If, for example, one party has made a significant contribution to the property after the Declaration of Trust was signed, this could lead the court to reassess the agreement. A court may take into account new circumstances when determining what is fair and reasonable in a divorce settlement, potentially overriding the terms of the original Declaration.
Marital vs Non-marital Declarations
The enforceability of a Declaration of Trust can also depend on whether the parties are married or unmarried. In the case of married couples, a Declaration of Trust may not always carry the weight it would in a non-marital relationship. Courts have broader discretion in divorce cases, and they might set aside the Declaration of Trust in favour of a financial settlement that considers the parties’ needs, contributions, and fairness.
For unmarried couples, however, the Declaration of Trust can be a more definitive statement of ownership, as long as it is properly executed and reflects the agreement between the parties.
Seek proper legal advice
Given the complexity of both divorce law and property ownership, it’s essential that both parties seek independent legal advice when drafting a Declaration of Trust. A legally sound and well-drafted Declaration, created with the help of professionals, is more likely to be enforceable in court.
In short, Declarations of Trust are generally enforceable in divorce proceedings, but they are not immune to scrutiny. The court will examine the document’s clarity, the fairness of the terms, and any changes in circumstances since the Declaration was made. If a Declaration is fair, properly executed, and transparent, it is more likely to be upheld. However, the overarching principles of fairness and equity in divorce settlements can lead the court to adjust the terms of the Declaration to ensure a just outcome.
When creating a Declaration of Trust, it’s crucial to get professional advice, as it could have long-lasting implications on the division of assets in the event of a divorce. By ensuring that the Declaration is clear, fair, and legally binding, both parties can safeguard their interests and avoid unnecessary disputes down the line.
If you need any assistance is negotiating a financial settlement regarding a property, please do not hesitate to contact our friendly and professional Family Team on 01245 228116 or by email at [email protected].
