Is the House Excluded if a Parent Helped With the Down Payment in Ontario?

Many couples buy their first home with help from a parent. After a separation, the spouse whose family helped often asks whether that money comes back to them first or whether it is simply shared.

The Family Law Act protects some gifts, but it treats the matrimonial home differently. This article explains the general rules in Ontario and what evidence tends to matter.

The general rule: gifts from a third person

Property acquired by gift or inheritance from a third person after the date of marriage is excluded from net family property. A parent is a third person. So a gift of cash from your parents that stays in a savings account, for example, is generally excluded.

Only gifts from a third person are excluded. Gifts between spouses are not, though a court may consider them when deciding whether to vary the equal share.

The matrimonial home exception

The exclusion does not apply to a matrimonial home. Excluded property can stay excluded when it can be traced into other property, but not into a matrimonial home. A gift or inheritance used to buy or pay down the family home loses its protection. Ontario.ca also says the family home is shared even if it was received as a gift or inheritance.

A matrimonial home is property in which a spouse has an interest and that is or was ordinarily occupied by the spouses as their family residence, judged at the time of separation if they have separated. In most cases, the house the family lives in meets that description.

The same logic applies if the house was owned before marriage. No date-of-marriage deduction is allowed for a matrimonial home, and the full value is shared. Practically, this means a parent's down payment used for the family home is usually part of the home's value that is counted, rather than being carved out for the spouse whose parents gave it.

Gift or loan?

Some families describe the money as a loan, not a gift. Net family property is calculated after deducting a spouse's debts and other liabilities. If the parental money is a genuine debt of that spouse, it may reduce that spouse's net family property. Whether it is a genuine debt depends on the facts, and how a debt owed by both spouses is treated is worth confirming with a lawyer.

The date-of-marriage deduction has its own limit: debts tied directly to buying or significantly improving a matrimonial home are not netted against that deduction. That limit concerns the date-of-marriage deduction, while the general deduction for a spouse's debts and other liabilities is described above. The spouse claiming a deduction or exclusion has the onus of proving it.

Evidence that may help show what was intended includes:

• A written loan agreement or promissory note signed when the money was advanced.
• Bank records showing the transfer and any repayments.
• Emails or messages from the time that describe the money as a gift or a loan.
• A letter from the parent explaining their intention.

How a court views any particular document depends on the circumstances, so it is worth confirming with a lawyer which of your records are likely to matter most.

Agreements, unequal sharing and common-law couples

Property the spouses agreed by domestic contract to exclude is also excluded from net family property. A domestic contract is unenforceable unless it is in writing, signed by the parties and witnessed. A marriage contract term that tries to limit a spouse's matrimonial home rights is unenforceable, so an agreement about the house itself needs careful drafting.

A court may award more or less than half the difference in net family properties, but only if equalizing would be unconscionable. Ontario.ca describes unequal division as limited to very special situations where an equal split would be extremely unfair to one spouse. Cohabitation of under five years is one listed factor. A parent's contribution alone does not guarantee a different result.

For unmarried couples, equalization does not apply. Property belongs to whoever bought it, and a partner who contributed to the other's property may have a claim, which may require going to court. How parental money is treated there can differ, so get advice.

What to do next

• Gather the purchase documents, closing statement and the bank records showing where the down payment came from.
• Collect anything in writing from your parents about whether the money was a gift or a loan.
• Find out the date of marriage and the valuation date, as both matter for the calculation.
• List the debts, including any amount you say is owed to a parent.
• Be ready to disclose everything in your financial statement, and to correct it promptly if you find an error.

Because the result depends on the facts and the evidence, speak with a family lawyer before you sign any agreement or tell your parents what to expect.

Frequently asked questions