August 2026 - Legal Update - Parents Who Give Money

When parents give money to children for a home purchase, there may be several questions that involve family law advice, real estate advice, or even estate planning. In this short article, I will look at this question from different legal perspectives. Since this is information for general purposes, it is not legal advice. You are encouraged to seek advice from a legal professional to best understand your unique circumstances before providing any funds. Family Law It is common for parents who give money to their child to ask that a marriage or cohabitation agreement also be prepared. This is because when money is used towards the purchase of a home, the child and their partner may choose to hold ownership jointly. By asking for a marriage contract or cohabitation agreement, the parents who gift the money are looking for a way to ensure that no matter what happens to the relationship, there is a carve-out for funds provided for their child’s benefit only, and that such gifted funds do not count towards any future asset split. For parents who are required to sign a gift letter in order for their child to obtain financing for their home purchase, a family law document can be the most reliable path forward. Real Estate One situation that parents sometimes find themselves in is acting as a cosigner to a property. In these situations, it is important to understand how a trust agreement can work alongside the child’s family law considerations. A trust agreement is usually recommended so that the parent who cosigns can confirm they are not beneficially entitled to the “growth of equity” in the home and therefore minimize the risk of exposure to capital gains. If a parent has also contributed to the down payment, trust agreements can be very effective for creating unique arrangements involving the priority of the return of funds, since the goal for most cosigners is at some point to be removed from title. Setting out expectations for how and when equity is returned can be an important conversation. Parents who are not on title can also benefit from trust agreements with their child. However, new trust reporting requirements are coming into effect, so legal and accounting advice will be required to understand the costs and benefits to untitled trust arrangements when compared with other tools like mortgages registered by parents or family law documents. Will Estate Planning One common issue for estate planning is that the principal residence is often the largest source of equity available to an estate. This means if a parent gifts a large amount of money, a married or common law partner may want to ensure their surviving spouse is able to live in the home and keep the equity if they pass away tragically while living together. Parents who expect to have their contributions protected or returned to them can be placed in a difficult situation of asking for repayment during tragic circumstances. Some solutions involve careful estate planning and using life insurance products to minimize the inconvenience and risk to a family in the event of tragedy. Last, parents who gift money to a child for a down payment might have other children and have concerns about being “fair”. Tools such as a hotchpot clause in the will, or specific terms within an insurance trust declaration for the handling of life insurance proceeds can create transparent ways to avoid one child receiving a disproportionate share of funds from their parents. If you found any of this helpful, reach out by email to [email protected] to schedule a consultation to discuss your unique situation. Michael Craig Liddiard, BA MA JD (905) 932-5437 [email protected] Liddiard Law Professional Corporation