When a Marriage Ends Can one Spouse Make a Claim on Gifts Given by the Parents of the Other Spouse?

My spouse and I just separated.  My parents think I should get the house because they gave me the down payment. What will happen if we go to court?

Sadly, this question comes up fairly regularly.  It’s not unusual for parents to help adult children buy their first home.

Theoretically, current laws would exclude at least part of the value of this house from family assets.  Note, however, that the details are important.

Until a few years ago, it was fairly routine for the Courts to split family assets on a 50:50 basis upon separation.  On March 18, 2013, the Family Law Act came into force.  One goal of this legislation was to give greater weight to the financial contributions of the parties in splitting up family assets.  In particular, the concept of "excluded property" was created to remove some assets from the “automatic” 50:50 split of family property.  Quite a few things can be treated as excluded property - most importantly, things owned by a spouse before the relationship started or gifts and inheritances received during the relationship.

In the case of Cabezas v Maxim (2016 BCCA 82), the Court was faced with a situation where Mr. Maxim’s parents paid the down payment for the home which Mr. Maxim purchased with his partner.  Mr. Maxim claimed it was an advance on his inheritance.  The Court reviewed the evidence and decided there was no proof the gift was intended only for Mr. Maxim’s benefit.  On that basis, the Court held that it was a gift intended for both.  The result:  the home was not an excluded asset.

The Cabezas case shows the limits on the concept of excluded property.  In fact, the Family Law Act states in section 85(2) that a spouse claiming an asset is excluded property has the onus of proving that claim.  The moral of the story is found in the advice lawyers often give to their clients: put it in writing.  If parents intend the gift to be for their adult child and not for the child's spouse, all parties should acknowledge this intent in writing.

Article written by Centennial Law Corp. (Douglas E. Dent)