Who Gets To Keep Monetary Gifts Given to Married Children, And Used To Pay A Mortgage, After A Divor
If a parent gives a married child money is the spouse* entitled to keep half of the money when the marriage breaks down? The answer, like so many legal answers, is "it depends."
At the risk of oversimplifying, upon the breakdown of a marriage or marriage-like relationship, the property that the couple accumulated during the marriage is divided equally between the spouses. There are a few exceptions to this general statement, one of which is the matrimonial home which is divided equally even if one of the spouses owned it prior to the marriage. Another exception is gifts or inheritances that one of the spouses received. As one can see, if a monetary gift is used to pay down the mortgage the situation becomes trickier. A recent British Columbia Court of Appeal decision helps clarify the situation.
The couple met in 2005 and began a marriage-like relationship shortly after. Sometime later, they purchased a house together with the male providing most of the down payment. Over the course of the relationship, his parents advanced significant funds to assist in paying down the mortgage. After his father's death, his mother changed her will and included the statement that the monies that were provided were an "advance" on his inheritance.
When the relationship broke down, the couple fought about who should benefit from those funds. The son claimed that they were a gift from his parents and an advance on his inheritance. His ex-spouse disagreed and claimed that the monies were given to both of them and that she was entitled to her share of them.
At trial, the judge ruled that, at the time the monies were given, the parents intended that both the spouses would benefit from the money. The son appealed.
The Court of Appeal agreed. It noted that there is a presumption that when a parent gives a married child a gift, the parent intends that both the child and his or her spouse will benefit. In the absence of evidence to the contrary, this presumption applies.
The Court of Appeal also ruled that the relevant time to assess what the parent's intention was is the time the gift was given. One cannot change a will or decide later that only one of the spouses was the intended recipient.
The Lesson: If a parent wishes to ensure that his or her child is the only recipient of a monetary gift that will be used to pay a mortgage, the parent to clearly communicate this to the spouses and keep a record of the communication. Failure to do so, will provide the spouse to argue that the presumption that both were to benefit applies if the relationship ever breaks down.
*For the purpose of this article spouse includes a person who lives in a marriage-like relationship also.
Cabezas v Maxim, 2016 BCCA 82 https://www.canlii.org/en/bc/bcca/doc/2016/2016bcca82/2016bcca82.pdf
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