Gift or Loan? Family Money Transfers and Divorce

The Ontario Court of Appeal has recently ruled on a case involving the transfer of money from father to son that was invested in the son’s matrimonial home. In finding that the transfer was a gift, the court clarified the law with respect to proving whether an inter-family transfer of wealth is a gift or loan.

Barber v. Magee

This case arose from a divorce claim. The parties in these proceedings agreed that the husband’s father paid him two advances totalling approximately $160,000, which were invested in the matrimonial home, which was held in the husband’s name. The wife claimed that these payments were gifts, and therefore properly part of the court’s calculation of net family property. The husband, on the other hand, claimed these payments were personal loans, and therefore part of his debts.

The trial judge found in favour of the wife, and agreed that the payments were gifts. The husband appealed.

Gift or loan – what was the intention at the time of the transaction?

In order to determine whether monies were advanced as a gift or as a loan, the Court will consider whether there are any objective indicators that characterize the payment as one or the other. While a gift has no expectation of repayment, which can be reflected by a lack of records, security, or payments, a loan is usually more formal. Loans, even privately, are often accompanied by agreements setting out terms, including repayment and interest.

In this case, the husband had no evidence to support his contention that the money was a loan from his father, nor of his obligation to repay the funds. Although the burden of proof is on the party claiming that the advancement of funds is a gift, in this case, in the absence of evidence to support the husband’s position, the trial judge was entitled to find that the funds were a gift.

Reliable Family Lawyers in Kitchener-Waterloo

The financial consequences of separation and divorce can be complicated, and may become contentious if they are not addressed promptly. If you have questions about the matrimonial home, and your financial rights and obligations as a spouse, our family law team can help.

At Duncan Linton LLP, our lawyers offer compassionate legal advice about family law matters, including divorce, separation, and child support. Call 519-886-3340 to schedule an appointment with one of our skilled lawyers, or contact us online.