Parents Loaning or Gifting Money to their Children

Business Law, Family Law

July 2021

Real Estate and Family Law Considerations:

Parents loaning or gifting money to children, and children owning property in a marriage or common law relationship

Are you providing money to your children and/or their partners to help them acquire real estate? If so, you may wish to consider documenting it.

In today’s real estate market, it has become common for parents to offer financial support to their children and their children’s partners to financially assist with property acquisition. If you are lending or gifting money in these circumstances, you might want to think about your long-term intentions with that financial contribution. For example, will you want to be repaid on demand? Will you want to collect interest? Is it an unconditional gift? Will you want your estate to be repaid upon your death?

Generally, if you loan money to your children with the intention of being repaid, two options to consider to protect your interests include:

  1. Engaging a lawyer to prepare only a promissory note documenting your arrangement. While this would not be secured against title to the property, it would at least serve as some evidence of your intentions when the time comes that you seek repayment.
  2. Engaging a lawyer to assist you with registration of a mortgage against your title to your child’s property.

Without proper consideration at the outset, the likelihood that your intentions are honoured decreases.

There are also family law considerations when you loan or gift money to your children. For example, what if you loan money to one of your children to acquire property and their romantic partner later moves in with them? Is your loan to that child protected? Or if you gift money to one of your children, which your child then uses to purchase a property jointly with their spouse? In those cases, your children will also want to consider entering into a cohabitation agreement or marriage agreement (which was commonly referred to as prenuptial agreements) with their partner, even before they move in together or get married.

Without proper documentation in the form of a cohabitation agreement or marriage agreement, the risk to both the parents lending or gifting the money and the child entering into a relationship with the new spouse are significant.

Depending on your specific needs, we recommend that you speak with a real estate and/or family lawyer about how to best document your situation. This could save you significant time and expense down the road. For further information, contact Jacob Lewin or Fanda Wu.

In addition, if you are considering gifting money or property to your children, there are estate planning considerations to take into account as well. Our article next week will cover this topic.

The previous article in this series can be found – What to consider before buying property with other?

Fanda Wu
Associate, Business and Real Estate Law and Family Law
Lindsay Kenney LLP | Vancouver Office
Jacob Levin
Associate, Business and Real Estate Law and Family Law
Lindsay Kenney LLP | Vancouver Office

This article is intended to be an overview of the law and is for informational purposes only. Readers are cautioned that this article does not constitute legal or professional advice and should not be relied on as such. Rather, readers should obtain specific legal advice in relation to the issues they are facing.