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A bare trust deed is signed when an individual accepts to hold a property or asset on behalf of a beneficiary. Here's what's usually included in one, and how you can create one easily using a template available online.
The bare trust deed is used where an individual (the "Trustee") holds an item or a property and acts as a "nominee" for one or more beneficiaries. Once the document is signed, the trustee becomes the legal owner of the asset. However, they commit to not personally benefit from their position.
A bare trust is used when an individual holds property or capital on behalf of one or more beneficiaries. The beneficial ownership is not affected by this contract, while the trustee has no active duties other than to transfer or manage the property to the beneficiary when required.
Bare trusts are widely used by couples who buy a house together or parents and grandparents who transfer assets to their children or grandchildren.
There are several key differences between a bare trust and other types of trusts.
For example, bare trusts are naked trusts often used from parents or grandparents to transfer property or assets to their family members, provided that they are aged 18 or above. A naked trust is a type of trust that only requires the trustee to transfer assets to the beneficiary, unlike other trust types where the trustee might also perform other duties with the assets.
A spendthrift trust provides the trustee with a property control trust, to limit an irresponsible beneficiary's access to capital or income. This includes family members who could easily fall into debt with creditors, or who aren't financially responsible.
When writing a bare trust deed, the document must contain detailed information about all the parties involved and the nature of the property or capital.
A bare trust needs to outline the role of the trustee and the beneficiaries. It must clearly underline:
A bare trust does not regulate the right of creditors to access the property. It also doesn't provide any particular protection for properties with a mortgage.
The document is written following the instruction of the beneficiary, meaning that it may or may not contain additional information based on the nature of the property.
The position of bare trusts is determined and guaranteed by legislation.
A bare trust is an effective, legally binding contract which protects all parties involved. The trustee holds the assets for the beneficiary but has no power to deal with it or to make any decision regarding it.
A bare trust deed can be established by a declaration of trust or a declaration of settlement. This involves that the owner of property declares themselves as Trustee for the benefits of the beneficiaries, and commits to holding that property.
Depending on the nature of the property, you may need the assistance of a professional lawyer to write and establish a bare trust. For example, this is particularly essential when buying a house or managing capital. Any omissions or mistakes in the drafting of this document may create a legal issue for all the parties.
A bare trust is written using a deed of settlement or a declaration of trust. When establishing this deed, the trustee must confirm that the property is owned by the beneficiary, while they have no power or responsibilities.
To be valid, the deed must be in full compliance with legislation and also satisfy any banks that need to see the deed for loan approval.
The bare trust document must be signed before beneficiaries sign the offer and acceptance.