If you own a mortgaged property and wish to place this into trust during your lifetime, we may be able to assist.
Ordinarily, property trusts must have the legal title in the name of the trustees. This means that, for the trust to be registered correctly, the legal owner needs to transfer their title to the trustees.
However, if there is a mortgage on the title, the lender has the ultimate say over any transfer of legal title. They almost always refuse to pass title from the mortgagor to their chosen trustees.
But the mortgage need not stop you from making a property trust altogether. A different means of achieving your goal can still be found.
Instead of changing legal title, as is usually the case, settlors of mortgaged properties must keep hold of their legal title. But they can still create a declaration of trust which dictates that their remaining equity (or a proportion of this) is to be held for the trust. Upon sale, the trustees receive their share, very much as they would under a normal property trust.
A “restriction” in favour of the trust is made with the Land Registry, with a charge in favour of the trust: much like the mortgage lender’s own charge on the deeds, but in favour of the trust. This keeps the trust’s interest in the sale proceeds securely registered.
This work still needs to be undertaken by a legal professional – everything from the declaration of trust to the restriction on the registered title – so those who do wish to place a trust over their interest in property should seek expert advice and assistance.
There is no need to let mortgage worries interfere with your estate planning: speak to a Member of the Society of Will Writers, and see how they and the SWW Trust Corporation can help you.