Is a Gift From Parents for a House Down Payment Shared in Ontario?

Many couples buy their first home with help from a parent. When the relationship ends, a common worry is whether that money stays with the spouse whose parents gave it.

The answer turns on whether the money was a gift or a loan, where it ended up, and how you can prove it. This article explains how Ontario's equalization rules treat each situation.

The general rule: gifts from third persons are excluded

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. A gift from your spouse is not covered, so gifts between spouses are not excluded.

Net family property is the value of what a spouse owns on the valuation date, except excluded property, less debts and certain pre-marriage property. The spouse with the lower net family property is entitled to one-half of the difference between the two.

Income earned on a gift or inheritance is excluded only if the donor or testator expressly stated that it is to be excluded from net family property.

The big exception: the matrimonial home

The gift and inheritance 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 used to buy or pay down the family home loses its protection.

So a down payment from parents that goes into the family home is generally counted in the home's value rather than shielded. Ontario.ca also explains that the family home's full value is shared even if one spouse owned it before the marriage.

If the same gift is kept in a separate account or put into something that is not a matrimonial home, the exclusion may still apply, but you would need to be able to trace it.

Loans from parents are treated differently

If the money was a real loan, it is a debt. In calculating net family property, a spouse's debts and other liabilities are deducted. That can reduce the spouse's net family property.

Whether money was a gift or a loan is a question of fact. A signed loan agreement, repayment records and messages from the time can help. Informal family arrangements that were never written down are harder to prove.

Title, joint accounts and proof

Between spouses, the presumption of a resulting trust applies as if they were not married. For example, money one spouse gives the other may be presumed to be held for the giver. However, property held in both names as joint tenants is presumed to be jointly owned, and money on deposit in both names is treated as held in joint tenancy.

The spouse claiming a deduction or exclusion has the onus of proving it. A person can also apply to court to decide a question of ownership of particular property between them and their spouse.

If you are not married, equalization does not apply. Ontario.ca states that property belongs to whoever bought it, and that a partner who contributed to the other's property may have a claim, which may require going to court.

What to do next

• Collect bank records showing when the money arrived and where it went.
• Ask your parents for any written note, email or message that says whether it was a gift or a loan.
• Note whether the money went into an account or property held in one name or both names.
• Do not move or mix the funds further without advice.
• Speak with a family lawyer about tracing, and with an accountant about valuation if needed.

Frequently asked questions