News
Declaration of Trust protects wife's house from creditors
A court has ruled that a woman should be allowed to keep her family home even though her husband’s creditors wanted it to be sold to help clear his debts.
It is an unusual case but illustrates the benefits that can arise from making a declaration of trust.
The husband had bought a house in his own name but his wife was concerned about the family’s financial security. She insisted that a declaration of trust was made in her favour which effectively handed the house over to her.
At the time this was done the husband had no significant debts but that changed a few years later and he fell into serious debt and was declared bankrupt. The trustees in bankruptcy applied for a court order setting aside the declaration of trust and argued that it had simply been a way of putting the property beyond the reach of his creditors.
The court ruled in the family’s favour. The Judge was satisfied that the main reason for the declaration of trust was to maintain the marriage. The effect was to place the house beyond the reach of the creditors, but whilst this was a consequence of the trust, it was not the reason for making it in the first place.
The ruling does not mean that a person facing financial difficulties can avoid creditors by simply placing assets in someone else’s name. However it does show that a declaration of trust made in good faith can help to protect a family’s financial security.
Please contact Roger Stone at Chichester or Sarah Evans at Selsey for more information.