IN BRIEF

Your par­ents give you and your spouse some mon­ey – say, to buy a house. Then you split up. To what extent will your spouse get the ben­e­fit of the gift?

When a rela­tion­ship breaks up, the mat­ri­mo­ni­al prop­er­ty may need to be divid­ed between the par­ties. The court will go through the fol­low­ing steps:

1. deter­min­ing whether it is appro­pri­ate to make an order divid­ing the prop­er­ty at all;

2. iden­ti­fy­ing and valu­ing the assets, lia­bil­i­ties and finan­cial resources (oth­er­wise known as ​“the pool” or ​“mat­ri­mo­ni­al property”);

3. assess­ing each party’s con­tri­bu­tion to the pool;

4. assess­ing each party’s future needs;

5. deter­min­ing what is just and equi­table in all the circumstances.

Parental gifts are an issue at step 3 – when assess­ing each party’s con­tri­bu­tion to the pool.

One of the fac­tors the Court will con­sid­er is the direct or indi­rect finan­cial con­tri­bu­tion made by or on behalf of a par­ty to the mar­riage to the acqui­si­tion, con­ser­va­tion or improve­ment of mat­ri­mo­ni­al prop­er­ty.

Parental gifts are finan­cial con­tri­bu­tions made on behalf of…whom? You alone? Or you and your spouse jointly?

Some­times it’s dif­fi­cult to tell. Par­ents do not always have clear inten­tions about whether the gift is intend­ed for you alone, or you and your spouse togeth­er. The waters are fur­ther mud­died because, in almost all cas­es, your spouse will inevitably receive some indi­rect ben­e­fit from the gift (e.g. liv­ing in the gift­ed home, or pay­ing less on the mort­gage) – even if it was intend­ed for you alone. 

In most cas­es, the Court will assume that your par­ents intend­ed the gift to go to you alone. There­fore, the gift will be count­ed as your con­tri­bu­tion to the mar­riage. This doesn’t nec­es­sar­i­ly mean that you will ​“keep the house” – but it will cer­tain­ly work in your favour.

If your spouse wants to argue that the gift should be count­ed as a joint con­tri­bu­tion, he/​she will need to pro­vide evi­dence that your par­ents intend­ed to give the gift to both par­ties. This is dif­fi­cult to prove, but has been suc­cess­ful in some cas­es (for instance, where the gift is in recog­ni­tion of both par­ties’ ser­vice to one party’s parents).

The fact that the prop­er­ty is reg­is­tered in the name of one or both par­ties is not deter­mi­na­tive. The Court has wide pow­ers to alter prop­er­ty inter­ests and order the trans­fer of prop­er­ty between the par­ties.


What does this mean for me?

If your par­ents pro­vide a finan­cial gift, it’s bet­ter for you if they pro­vide it to you alone. Of course, this is ulti­mate­ly a deci­sion for your par­ents, not you.

If you are the oth­er par­ty, and your spouse’s par­ents pro­vide a finan­cial gift, you may wish to seek some clar­i­fi­ca­tion about who exact­ly the gift is intend­ed for. If it’s intend­ed for both par­ties, it’s prefer­able to get that in writing.

Ulti­mate­ly, the best way to quar­an­tine cer­tain assets from the mat­ri­mo­ni­al pool is to enter into a bind­ing finan­cial agree­ment. This can be done before or dur­ing the mar­riage, and pro­vides far more cer­tain­ty for every­one involved.

To speak to one of our Fam­i­ly Law spe­cial­ists, please contact: