Parental Gifts: Can they be bulletproof in the face of divorce?

Parents often provide financial assistance to their children to help with the purchase of a home. But if this property becomes a matrimonial home, how can they protect their "gift" from becoming the property of their child's ex? There are a few tactics, but recent court decisions make it more complicated for parents to ensure that gifts to their children remain in their children's possession after divorce.

Common law assumes that money given from parent to child is a gift, but the Family Law Act defines that gift - if it was used to purchase a marital home - as divisible between the spouses in the event of a divorce. Two cases (2004 and 2005) saw this happen. The parents thought they had protected their financial gifts because the couples signed mortgages in favour of the parents. However, the parents requested no payments from the couples. After ten years, mortgages without payments become void. The justice in each case decided that the spouses should divide the matrimonial home.

So, if parents are going to use this approach to protecting their gifts, they must demand monthly verifiable payments (i.e. a cheque) on the mortgage, regardless of how little the sum may be. Of course, they should also seek independent legal counsel before granting such gifts.

It seems the best solution to the problem is a marriage contract, regardless of how the couple might interpret the request to sign it. Gift-giving is often an emotional experience, especially when it accompanies an exciting time for a family, but it is important to keep in mind some potential practical realities on such occasions. Otherwise, without a marriage contract in place, parents must understand that money they give to a child to purchase a matrimonial home is a gift to the couple, not to their child alone.

Reviewed March 2015