The price of houses across Canada has seen exponential growth in recent years.
For many young adults the only way to purchase a home is with the financial assistance from parents or other generous family members. Although family generosity allows new home owners the ability to enter the increasingly expensive housing market, any significant financial gift from a family member to a child comes with potential challenges.
Family law Issues
For many young adults the purchase of a home coincides with a major relationship change – the start of a marriage or cohabitation arrangement. Where the family of either cohabiting young adult is making a significant financial contributions to the purchase of the home, and the cohabiting young adults are spouses (either marriage spouses, or cohabiting for the requisite time to be considered spouses under the Family Law Act), the spouses should consider entering into a domestic contract to ensure that, should the relationship terminate, the financial contribution made by each family is protected.
This is particularly important where the spouses are married because the ”matrimonial home” is not excluded property in the calculation of net family property under the Family Law Act, even if one of the spouses preowned the home prior to marriage.
Where parents make a gift to one or more of their children to assist in the purchase of a home, they should consider whether their will needs to be updated to include an equalization provision of any kind should they pass away before having an opportunity to equalize the amounts gifted to all of their children. This may be done by way of a straightforward legacy payment. Another option is the insertion in the parent’s will of a ”hotchpotch” cause to ensure that all children ultimately receive the same distributive value from the parent’s assets, during life and after death. Providing for such equalization may help prevent future disputes and resentments should one child not receive the same amount of gift towards the purchase of a home as his or her siblings.
Written by Barrie Hayes