Gifts From Parents and Separation in Ontario: Who Keeps Them?

Many couples buy a first home or cover a rough patch with help from a parent. When the relationship ends, a common worry follows: does that money stay with the child it was meant for, or does it get shared?

The answer depends on who gave it, when, what it was used for, and whether it was a gift or a loan. This article explains the general Ontario rules for married spouses and the questions that tend to decide the outcome. A lawyer can apply them to your facts.

How property is divided between married spouses

For married spouses, Ontario uses an equalization approach. When spouses separate with no reasonable prospect of resuming cohabitation, the spouse whose net family property is smaller is entitled to one-half of the difference between the two net family properties.

Net family property is the value of all property a spouse owns on the valuation date, less debts and liabilities and less the net value of property owned on the date of marriage. The valuation date is, first, the date the spouses separate with no reasonable prospect of resuming cohabitation.

Unmarried partners are not spouses for this equalization regime. Common-law couples are not legally required to split property acquired while living together, and may rely on a cohabitation or separation agreement instead. If you were never married, how a parent's money is treated can turn on other legal arguments that are worth discussing with a lawyer.

Gifts from a third person to one spouse

Excluded property is not part of net family property. It includes property, other than a matrimonial home, that a spouse acquired by gift or inheritance from a third person after the date of the marriage. A parent is a third person for this purpose, so a gift from your parent to you alone can fall into this category.

A gift of a non-home asset can generally be kept out of the calculation. A gift to both of you jointly is a different situation, and so is a gift made before the marriage, which is discussed below.

The burden is on the person who claims an exclusion or a deduction to prove it. In practice, that means being able to show who gave the money, when, and that it was meant for one spouse.

Where the money went matters

Even if a gift starts out as excluded property, what you did with it can change the result. The table below summarizes the general rules.

A matrimonial home is property in which a person has an interest and which is, or was at separation, ordinarily occupied by the spouses as their family residence. Both spouses have an equal right to possession of it. This is why a parent's down payment on the family home is often not protected the way a gift of cash held elsewhere might be, unless the spouses agreed otherwise.

Ownership questions between spouses are generally treated as they would be between unmarried persons, except that property held as joint tenants and money on deposit in both names is presumed to be intended as joint ownership. That presumption can be rebutted with evidence.

Loan or gift? Why the label matters

If your parents lent you money rather than gave it, the analysis changes. A true debt owing at the valuation date may be deducted from your net family property, because debts and liabilities are subtracted when calculating each spouse's share. A gift, by contrast, may be excluded instead.

Whether money was a loan or a gift is a question of the facts and the evidence, and a lawyer can advise on how a court would likely view your situation. Things that tend to be relevant include:

• A written loan agreement, promissory note or gift letter signed at the time.
• Whether any repayments were actually made, and by whom.
• Whether the money went to one spouse or to both.
• Emails or messages from your parents explaining what they intended.
• Bank records showing the transfer and where the money went next.

Because the person claiming a deduction or exclusion must prove it, informal family arrangements with no paperwork can be difficult to establish later. Both a loan claim and a gift claim need evidence.

Money you had before the marriage, and agreements

If a parent gave you money before the wedding, a different rule applies. The net value of property owned on the date of marriage is subtracted when calculating net family property. Property owned before the marriage is usually shared only for any increase in its value.

Spouses can also change the result by agreement. Property that a domestic contract says is excluded is excluded property. Marriage contracts, cohabitation agreements and separation agreements can deal with property division, and both partners must sign in front of a witness who also signs.

A court can divide property unequally only where an equal split would be extremely unfair to one spouse. That is a high bar, and it should not be assumed to apply simply because a parent contributed.

What to do next

Act early on records and watch the deadlines. To go to court over an equalization amount, you generally have six years from separation or two years from the divorce being final, whichever comes first. Speak to a lawyer before signing any agreement, because you should understand the terms, give complete and honest financial information and not be under pressure.

• Write down the date of marriage and the date you separated.
• Collect bank statements showing the gift or loan arriving.
• Find any loan agreement, gift letter, emails or messages from your parents.
• Trace where the money went: an account, an asset, or the family home.
• Note whether it was paid to one spouse or both.
• Ask your parents to write down what they intended while memories are fresh.
• Book a consultation with a family lawyer before negotiating or signing.

Frequently asked questions