Top-rated* Vancouver parental loan lawyers understand that many parents help their married children out by providing parental loans to them. We advise you to seek advice from our highly experienced parental loan lawyers when you plan to loan your children money, because without sound legal advice, a parental loan can quickly evolve from a simple, good-willed gesture to the source of a major headache. Click here to meet with us before monies are advanced or after so you can make things right.
Our top-rated* Vancouver parental loan lawyers regularly advise our wealthy clients to secure any alone to a child and make it clear what the terms of the Vancouver parental loan is and how it is secured.
Jian Kang articled student to our Vancouver parental loan lawyers team is pleased to explain a recent case that can help the unwary from making a huge financial mistake. Our Vancouver parental loan lawyers provide the following summary of the 2015 BC Supreme Court case, Byrne v. Byrne
Background
Mr. and Ms. Byrne are middle-aged spouses who have two children. They separated after a seventeen year relationship during which they accumulated a number of assets and substantial debt. Their assets included two motor vehicles, a family home, a trailer, a pension and RRSPs. Their debts were composed of student loans, bank loans, and credit card debt.
The husband’s parents also made monthly payments to him over several months in 2010 and 2011 and they consider those advances as a loan which they expect him to repay. One question that the judge decided upon, which is also the focus on this article, is whether the money from his parents is a family debt that should be paid equally by the parties.
The skilled Vancouver parental loan lawyers at MacLean Law know a gift during happy times in a marriage can quickly be characterized by parents of one of the spouses as a loan. In these cases the facts surrounding the advance of money and what happened in terms of expectations for this money really matter. Memories are one thing but documents and actions are more important.
The Family Loan
In the following paragraphs, the court conducts a detailed and scholarly review on the legal test on whether an advancement of money from parents to adult, independent children is a loan and or a gift in the absence of agreements.
[38] The claimant testified that in October 2010, he was in transition from school to work. At around this time the parties had begun renovations to their home and the expenses were becoming higher than they could afford. The claimant’s father, Mr. Byrne Sr., agreed to lend him money at the rate of $1000 every two weeks. Mr. Byrne obtained a line of credit and made payments into a joint account held with the claimant. Mr. Byrne Sr. said the arrangement was “done as a loan – no question about it”. There were no terms of payment for the loan. Neither Mr. Byrne nor, Mrs. Byrne, spoke with the respondent about the loan. No document was ever signed as evidence of the loan nor was an express promise made to repay the amount given to the claimant.
[39] From October 6, 2010 to May 6, 2011, Mr. and Mrs. Byrne made twice monthly payments to the claimant. The amount confirmed as advanced by them was $16,200.
[40] I accept that Mr. and Mrs. Byrne gave the claimant money to assist him in the transition from life as a student to an active member of the workforce. The issue is whether payment of these funds constituted a gift or loan. If it is a loan it will be characterized as a family debt pursuant to s. 86 of the FLA and subject to division between the parties.
[41] Payments from a parent to an adult child are generally not presumed to be gifts; they are presumed to form a resulting trust in which the parent keeps an interest in the property. However it is open to a party claiming the transfer is a gift to rebut the presumption of a resulting trust by providing evidence to that effect: Pecore v. Pecore, 2007 SCC 17 (CanLII).
[42] In Pecore, the Supreme Court of Canada addressed how the presumptions operate in the context of transfers from a parent to an adult child:
(a) the focus in any dispute over a gratuitous transfer is the actual intention of the transferor at the time of the transfer (para. 5);
(b) When the transferor’s intent is unavailable or unpersuasive, the presumptions of advancement (a gift) and resulting trust are useful guides and will apply (para. 23);
(c) gifts from parents to independent adult children are not presumed to be gifts; rather the presumption of a resulting trust applies (para. 36);
(d) there may be circumstances where a transfer between a parent and an adult child was intended to be a gift and it is open to the party claiming that the transfer is a gift to rebut the presumption of resulting trust by bringing evidence to support that claim (para. 41);
(e) the burden on the party claiming a gift was made is proof on a balance of probabilities (para. 43).
Vancouver Parental Loan Lawyers Explain Factors
Our Vancouver parental loan lawyers ask you to particularly focus on what the court will look at to decide if an advance of money to a couple is a loan or really a gift.
[43] Several factors can be examined to distinguish between loans and gifts in the family context. These were addressed in Kuo v. Chu, 2009 BCCA 405 (CanLII) at para. 9 where the Court of Appeal adopted the factors described in Locke v. Locke, 2000 BCSC 1300 (CanLII) as applicable to the question of whether a loan or gift was intended:
(a) Whether there were any contemporaneous documents evidencing a loan;
(b) Whether the manner for repayment is specified;
(c) Whether there is security held for the loan;
(d) Whether there are advances to one child and not others, or advances of unequal amounts to various children;
(e) Whether there has been any demand for payment before the separation of the parties;
(f) Whether there has been any partial repayment; and,
(g) Whether there was any expectation, or likelihood, of repayment.
Vancouver Parental Loan Lawyers Explain Judge’s Decision
In Byrne our Vancouver parental loan lawyers point out the judge concluded that the parents always intended to make a gift to both spouses and not a loan and accordingly the wife did not have to repay her in-laws the money they advanced to her and their son.
[44] In M.F.R. v. B.P.R., 2010 BCSC 1063 (CanLII), the court concluded that no loan was made in circumstances where there were no contemporaneous documents or promissory notes produced to explain why money had been advanced. In M.F.R. repayment was never discussed with the wife. No security was given, no demand was made before separation, and no money was repaid to the husband’s father.
[45] In the case at bar, the respondent submits that the money Mr. and Mrs. Byrne paid to the claimant was a gift. The respondent knew that the claimant was receiving money from his parents but did not understand there was any agreement he was obliged to repay them. The indicia supporting her argument are as follows:
(a) There was no evidence of a discussion about a loan or a promissory note and no details regarding the interest payable or the term of the alleged loan;
(b) There is no information regarding the timing or manner for repayment of the alleged loan before the Court;
(c) There was no security held for the alleged loan;
(d) There is no evidence regarding advances or loans to other children;
(e) There was no demand for repayment before or after the parties separated; and,
(f) There was never a repayment in whole or in part during or after the marriage.
[46] I accept the uncontradicted evidence that Mr. and Mrs. Byrne borrowed money against a line of credit to assist their son. They seem to have no doubt that they were lending the money to the claimant, Although the presumption of resulting trust would usually operate to constitute these payments as a loan since it was made by parents to their adult child, there is a paucity of evidence to the effect that corroborates their contention that this was indeed a loan. No other evidence corroborates the claimant’s assertion or that of his parents, that this was money he is agreed to repay his parents.
[47] I do not accept the claimant’s assertion that the respondent was made aware of this loan and affirmed their obligation to repay his parents. However, that factor is not determinative of the question of whether a loan was made.
[48] On the balance of probabilities and in the absence of evidence described in Kuo concerning parental loans, I am satisfied that the claimant’s parents advanced this money without expectation of repayment of principal or interest and that their current desire for repayment was more likely triggered by the separation of the parties.
[49] As a result, I conclude that the money paid by the Byrnes to their son is not a family debt as described in s. 86 of the FLA.
Our Advice
Over and over again, our experienced Vancouver parental loan lawyers have seen family loans become central issues in court, incurring significant expenses and emotional distress to all parties, when all this could have been prevented by seeking advice from a parental loan lawyer and properly executing a simple, clear contract. A divorce is already a major headache in anyone’s life. Don’t make it even worse. There are many issues in a divorce action that are complex in nature and often best determined by a judge, but parental loan is NOT one of them. Our Vancouver parental loan lawyers will make things clear from the start and provide proper security and repayment terms so your money is protected. Trust between family member sis great but for a modest cost our Vancouver parental loan lawyers will protect you from a huge mistake and high legal fees in the future.
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At MacLean Law, our top-rated* Vancouver parental loan lawyers are happy to help you with any inquiries you might have regarding parental loans, be it preparing a loan agreement, advising on the issue, or resolving a dispute arising out of it.
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