Parents Who Gift "Home Sweet Home": Banaszek Family Law explains how to protect a down-payment gift from equal division

Let’s face it… home ownership is an expensive and serious undertaking. For couples ready to purchase a house together, the intermingling of financial resources is almost certainly a must. In addition to pooling your life savings with your life partner to come up with an acceptable down-payment, many couples (eagerly) accept parental involvement (i.e. a down-payment gift) to make their home ownership dreams come true.

The gifting of down-payments by parents to their millennial children is on the rise as home ownership becomes increasingly unattainable by historical standards in many Canadian cities. Unsurprisingly, down-payment gifts have doubled from 7% in 2000 to 15% for homes purchased between 2014 and 2016 (Mortgage Professionals Canada). There are legal implications to consider when monetary gifts are poured into a down-payment for a soon-to-be married couple’s home, especially since a substantial amount of Canadian marriages end in divorce.

Dividing the matrimonial home upon divorce in Alberta

In the event of separation and divorce, both spouses will be entitled to half of the home’s value after the mortgage and other encumbrances are accounted for, even if part of the down-payment was a gift from one of the spouse’s parent(s).

[Unequal financial contributions between spouses to attain their home can also have significant legal implications if the parties separate in the future — Stay tuned for a future blog post on this issue!]

If it is your intention to protect the down-payment and ensure that it is either paid back to your parents or remains a gift that your spouse cannot claim entitlement to, steps MUST be taken to legally protect the intention of the gift. Although gifts received from third parties to one spouse alone are often exempt from the presumptive equal distribution under the Alberta Matrimonial Property Act, the matrimonial home is treated differently. The matrimonial home is an exception in family law, and division of the value of the home depends on the circumstances surrounding the down-payment.

For example, in Henderson-Jorgensen v Henderson-Jorgensen, 2013 ABQB 213, the Alberta Court of Queen’s Bench dealt with a claim by the Husband that his father had gifted him $83,500 for the down-payment on a condo which was later sold to buy the matrimonial home and he claimed that this money should not be divided with the Wife. The key finding of the Court was that the Husband’s father was gifting the down-payment to both parties equally. Therefore, the Husband’s claim for the $83,500 exemption from the matrimonial home value was denied by the Court (para 140-41).

If there is disagreement about how the value of the matrimonial home is to be split between the parties and the matter is litigated in Court, the intention of the person making the gift will be taken into account by the judge. Free of any agreement, each party will have to convince the Court that the down-payment was intended to either be a gift for both parties or specifically for one. A spouse claiming the gift is excluded from division of matrimonial property is responsible for demonstrating that the property is really a gift to them alone. The onus to prove this fact is on the spouse wishing to protect the value of the property for their sole benefit.

Protecting the down-payment gift from equal division

Parents wishing to make home ownership a reality for their children while also protecting their rights need to have documentation that clearly states that the gift is for one person (their child) only. If there is no contract or document ensuring that the down-payment is protected, the way in which the home is used by the parties will determine the status of the gift. This means that if the home is the primary residence of both parties, and especially if the couple is raising children in the home, it will be considered the “matrimonial home”. To help ensure that the down-payment gift remains with the intended person upon dissolution of a marriage, a prenuptial agreement is your best bet for preserving the significant contribution from being divided equally.

Prenuptial agreements can be executed before the parties marry, or parties who are already married may enter into a post-nuptial agreement to have the same contractual effect. A marital agreement will reduce the potential risk for financial disappointment when your emotions are already in a state of turmoil. If the parties are in a common law relationship and not married, a cohabitation agreement may also be used to outline the total down-payment contributions received from third parties to safeguard against an unintended “payout”.

Discussing the importance of a prenuptial or cohabitation agreement with your spouse usually alleviates financial tension down the road. Read about prenuptial agreements and the value they provided in Banaszek Family Law’s blog post: Prenups are for Lovers.

An added benefit of entering into a cohabitation, prenuptial or post-nuptial agreement is the requirement for the couple to disclose their financial circumstances to each other. Relationships often fail due to difficult financial circumstances and a lack of communication, so obtaining an understanding of each other’s finances before tying the knot may be a key to avoiding divorce (or at least gaining some certainty that marriage is the right choice in advance of making it official).   

The concurrent rise in down-payment gifts and rate of divorce makes entering into a prenuptial agreement to prevent a generous gift from being disturbed in an unintended manner a no-brainer. Banaszek Family Law offers flat rates for uncontested family law agreements for clients in Alberta and British Columbia. Family law agreements provide peace of mind for both the parents gifting down-payments to their children and the spouses purchasing their new home.

Make the next move by scheduling your initial consultation with Adrianna Banaszek today, HERE

Follow Banaszek Family Law on Twitter: @BanaszekLaw, Facebook, and LinkedIn.

View from the Driver’s Seat: Banaszek Family Law prepares you for your initial consultation with a family lawyer

Working up the courage to attend at an initial consultation with a family and divorce lawyer is a hurdle for many people to overcome. Many people believe that they must be prepared to walk away from their relationship or be prepared to endure protracted litigation if they are scheduling a meeting with a lawyer. Adrianna Banaszek, family lawyer and founder of Banaszek Family Law, explains that this perspective should not be the norm, and illuminates why initial consultations are very important meetings for her and her clients:

“The most rewarding aspect of my job is empowering people dealing with family law issues so that they feel less hopeless during an emotional and very stressful transition in their life. When I meet with clients for the first time, I focus on gaining an understand of where they would like to see themselves, and their families, in the future.

Every client has a different definition of “resolution”. During the initial consultation, I focus on understanding what each client perceives to be a resolution of their matter because that will inform the legal options I propose and the level of representation I can offer. The decisions made as a result of the legal advice obtained can have significant impacts for the client and their family, and that aspect of the initial consultation is never taken lightly by me.”

What is an initial consultation?

At Banaszek Family Law, initial consultations provide the opportunity for clients to canvas their questions about their family law and divorce matter. The lawyer’s job is explain the legal framework and the available options to move towards a resolution. Some clients wish to use their initial consultation as an opportunity to obtain independent legal advice about a discrete issue so that they may confidently take next steps as a self-represented litigant. Initial consultations are also an opportunity for clients to interview lawyers before retaining them. The initial consultation should provide the client with insights into the lawyer’s ability to communicate confusing concepts in an understandable manner, and confirm if the lawyer is the right fit as a legal representative in a very personal matter.

The meeting with the lawyer is completely confidential - this means that the lawyer cannot share anything about the conversation you have with anyone else, unless it would be valuable to do so and permission from the client is first obtained. The lawyer is also precluded from representing your spouse/the opposing party in the future, so there is no reason to worry about the private information you are divulging being used against you in any manner. Whatever your desired purpose for the initial consultation, it is important that you come prepared to ensure that you reap all the benefits of the valuable meeting.

Preparing for your initial consultation at Banaszek Family Law

For many family law clients, the initial consultation is the first time they have ever explained their very personal concerns to a stranger. Due to nerves, stress, and the novelty of the experience, many clients do not take full advantage of their initial consultation. We have compiled 5 TIPS that will help you prepare for an initial consultation with Banaszek Family Law:

TIP 1: Complete the Initial Consultation Form

For starters, complete and send back the Initial Consultation Form before attending at your initial consultation. The From will be emailed to you once your consultation is scheduled with Banaszek Family Law. The Initial Consultation Form allows you to provide details about the parties involved and a description of your matter in advance of meeting with the lawyer. Jot down some of the questions you would like to have answered by the family lawyer – this will provide the lawyer with a heads-up of which issues should be prioritized so that they can better structure your consultation to take advantage of the scheduled time. There have been occasions where the Initial Consultation Form has confirmed that the client’s legal issue is not of a family law or divorce nature, allowing us to redirect the client to another lawyer in the appropriate practice area.

TIP 2: Prepare your documents (and bring them with you!)

You should bring the following documents and items to your initial consultation:

  • Your government-issued photo identification – the Law Society of Alberta and British Columbia require that the lawyer takes steps to verify the identity of the client. We will keep a scanned copy of your photo ID on file.

  • Filed Court documents – these documents will alert the lawyer to any upcoming Court dates or filing deadlines. Reviewing filed Court documents will also provide the lawyer with a better understanding of the opposing party’s position so that a comprehensive strategy that meets your needs can be prepared.

  • Your notes and any questions you may have (check out TIP 3 below). The initial consultation will go by very fast and we want to make sure that most of your questions are canvassed, so don’t leave it up to memory.

  • A notepad and pen - if you don’t bring your own, we will provide these for you so that you may note useful resources or information explained during the consultation.

TIP 3: Write down your questions

Jot down some of the questions you would like to have answered by the family lawyer in advance of stepping foot in their office, and bring them with you to the consultation. You will likely think up many questions you would like answered in the days (or hours) leading up to your consultation. Your list of questions will guide the consultation and increase the productivity of the meeting. The initial consultation goes by quickly and we want to make sure that most of your questions are canvassed, so don’t leave it all up to memory!

TIP 4: Know the history

Be prepared to outline a history of your litigation or a general overview of what has occurred since your separation/conflict arose, if relevant. For example, what has the parenting arrangement looked like since separation? How were the finances organized in the household during the marriage and after separation? If you come prepared to explain your situation, the consultation will run more smoothly.

TIP 5: Arrive on time

Once your initial consultation is booked, make sure you know where the lawyer’s office is located and how you are going to get there. It is important that you come on time to your consultation so that you are calm, collected and can take advantage of the entire time scheduled. We guarantee that there is an hour blocked off for your consultation.

Banaszek Family Law is located on the 30th floor of the TD Canada Trust Tower, downtown Calgary. We are conveniently located on the C-Train line at the 4th Street SW stop. If you are driving in, the CORE parkade is located on 4th Street, between 8th Avenue SW and 7th Avenue SW and is open during our hours of operation.

Disclaimer: Initial consultations should be MORE than a sales pitch 

If a lawyer only uses the initial consultation as a sales pitch and promises you the ‘moon and the stars’ but does not provide you with any valuable information, be weary of their ability to represent you. You should be comfortable with the family lawyer you hire because they will be representing your interests during what is usually a highly emotional and stressful time in your life. Use the initial consultation as a time to interview your potential new lawyer – remember, it’s a two-way relationship. The lawyer must understand your perspective, goals, legal and emotional budget. They must also be able to communicate legal issues in an understandable manner. The lawyer should be able to explain what they can do and what their limitations are (whether that be time constraints or general litigation constraints).

At Banaszek Family Law, we want to make sure that your initial consultation is productive and that you receive the necessary information to take next steps on your own, or understand what our involvement in your legal matter looks like. The initial consultation is your chance to interview your future family lawyer and confirm that the relationship is a good fit.

You are one click away from taking control of your life and finding answers to your family law and divorce questions. Make the next move by scheduling your initial consultation with Adrianna Banaszek today, by clicking HERE

Follow Banaszek Family Law on Twitter: @BanaszekLaw, Facebook, and LinkedIn.