One of the most contentious issues for Vancouver family lawyers under the Family Law Act is how gifts and inheritances are dealt with when a relationship ends. Often these gifts or inheritances are used to buy property outright, to make down payments, or to reduce or pay off mortgages on a jointly owned family home. Further, what happens when these monies are placed in joint bank accounts or joint investments?
In the BC Supreme Court case of Asselin v Roy, full credit was given to both spouses who received a gift/inheritance as well as for the starting value of an asset at the date of cohabitation that was later used to buy or pay down debt on a jointly owned asset. However, a recent case on different facts came to a different conclusion. The Family Law Act is still in its infancy but it is clear that written documentation showing exactly who any gift was made to when there are two spouses is a smart move.
What happens to inherited or gifted monies or monies or assets brought into a relationship that are later placed in joint names?
The recent case of Cabezas v. Maxim, 2014 BCSC 767 (CanLII), warns us that parents who make gifts, loans or advances on inheritances need to make it clear to whom the gift was given unless they want the monies advanced to be shared equally with their child’s spouse. Excluded property in BC, which includes gifts to one spouse, is not shared except for the gain on this property. However, missing or unclear records can make it unclear to whom the gift was given and this can cause big problems for the person trying to exclude this property. Parents who plan to help their child alone, during marriage, need to clearly document whom they intended to benefit or loan money to, either by way of a mortgage, loan or clear proof it is an advance on inheritance to their child only and not to the married couple jointly.
In the recent BC Supreme Court case of Cabezas, the court focused on a parent’s evidence that the gifted money was for both spouses and not just their own child. Unless parents want to share advances or gifts equally they need clear documentary proof of whom the gift was to. We recommend that any monies advanced by way gift or inheritance be made with documentation showing whom the money was given to such as a mortgage to avoid confusion or disputes upon marriage or relationship breakdown. If the gift is used to buy property in joint names or pay down debts documentation should be obtained to show these monies are the excluded property of one spouse alone.
Here is what the Chief Justice of the BC Supreme Court decided concerning monies advanced by one spouse’s parents:
[63] Mr. Nilson said it was transferred to both Daniel and his wife, but then testified that it was transferred to Daniel only. Mr. Nilson did not indicate the basis for his alleged knowledge. I prefer the evidence of Mrs. Maxim on this point. She said that she gifted the 38% interest that her husband held in the property to both her son Daniel and his wife.
[64] The respondent’s parents loaned money to his sister Cindy and her husband for the acquisition of investment property at Whistler, British Columbia. This property was held jointly by Cindy and her husband. I infer that the respondent’s parents advanced funds to the respondent in the same fashion as they advanced funds to Daniel and his wife, and to Cindy and her husband; that is, regardless of the fact that the spouses of these children would also benefit from their financial assistance.
[65] I conclude that when the respondent’s parents provided financial assistance to their children, they did so regardless of whether the child’s spouse was registered as one of the owners of property acquired with that assistance, and that neither of the respondent’s parents turned their minds to how such properties were registered. I find that this was what occurred when they made the mortgage payments on the Madeira Park Property.
[66] In this case, despite the advice of Mr. Nilson, there are no contemporaneous documents evidencing a loan, nor any security asked or obtained for any of the lump sum mortgage payments made by the respondent’s parents. There has been no demand for repayment from the respondent or the claimant, and certainly no repayment of any kind. It was not until after the last payment that Mrs. Maxim chose to treat her payments to the respondent as an advance on his inheritance.
[67] I have already concluded that the Madeira Park Property was a family asset. Considering the factors outlined in Locke, I am not persuaded that the funds used to pay off the mortgage were provided to the respondent either as a loan or as an advancement on his inheritance. Such a conclusion would be at odds with how the respondent’s parents treated all of their children. While I accept that the respondent’s mother has subsequently and sensibly chosen to treat the gifts to both of her sons and their partners as advancements against what the sons will inherit from her estate, I find that such an intention was formed well after the gifts were given. I therefore find that the funds in question were given as a gift intended to benefit both the respondent and the claimant.
Our Vancouver Family Law Gifts and Inheritances Lawyers are honoured to have been named Vancouver’s top family law firm by Top Choice Awards. Call us at 604 602 9000 if you have an excluded property case involving gifts and inheritances.
