When parents transfer money or property to their adult children in relationships, the legal consequences can be significant and surprising. Understanding whether these transfers are gifts, loans, or something else entirely can mean the difference between keeping assets protected or losing them in a family property division.
The Critical Question: Gift to Your Child or Gift to the Relationship?
Under BC’s Family Law Act (FLA), gifts from third parties to one spouse start as excluded property under section 85. This means they belong solely to the recipient and aren’t divided if the relationship ends. However, the BC Court of Appeal in V.J.F. v. S.K.W., 2016 BCCA 186, established that when one spouse voluntarily transfers excluded property to the other spouse without getting anything back, the exclusion is lost.
The courts look at what you do with the money, not just what you say about it. Recent BC Supreme Court decisions illustrate how easily exclusions disappear:
Joint Title = Lost Exclusion: In Turabi v. Nabi, 2025 BCSC 48, using excluded funds to buy a jointly-titled home meant the equity became family property subject to equal division.
Pooling Funds = Family Property: The Lan v. Buchanan, 2024 BCSC 302 decision showed that pooling previously owned assets or sale proceeds into family projects evidences an intention to gift to the relationship.
Joint Accounts Spell Trouble: In Namdarpour v. Vahman, 2019 BCCA 153, the case found that depositing “excluded” money into joint accounts and using it for family purposes, while splitting income, provides strong circumstantial evidence of a gift to the relationship.
Proving a Loan: The Kuo/Locke Factors
If parents intend to make a loan rather than a gift, the burden of proof is high. Courts apply factors from Kuo v. Kuo and Locke v. Locke, examining:
- Contemporaneous written documentation
- Specified repayment terms and interest
- Security or collateral
- Pre-separation demands for repayment
- Partial repayments made
- Realistic expectation of repayment
In Schneider v. Owers, 2019 BCSC 528, vague “loans” with no paper trail, no terms, no demands, and no repayments failed entirely. By contrast, Lan v. Buchanan case succeeded because the parties had signed promissory notes, registered security, made partial repayments, and paid back proceeds from property sales.
The legal presumption actually works against a gift interpretation: transfers from parents to independent adult children are presumed to be resulting trusts (essentially loans or retained beneficial interests) unless a true gift is proven, as explained in Pecore v. Pecore and applied in J.D.C. v. K.L.M.F.C., 2014 BCSC 2182.
Practical Protection Strategies
If you’re lending money to your child:
- Document everything contemporaneously: Create a simple promissory note with parties identified, amounts, dates, repayment terms, and ideally interest rates
- Register security: For large amounts, take a mortgage or general security agreement
- Act like a real lender: Keep transfer records, request periodic payments, send demand letters if needed
If you’re giving a gift you want kept as excluded property:
- Create a gift letter: State clearly this is an unconditional gift to your child alone, not to the spouse or relationship
- Keep it in sole name: Never route through joint accounts or use for family expenses if preserving the exclusion matters
- Avoid joint title: Joint titling is among the strongest evidence of gifting to the relationship, as V.J.F. and Turabi demonstrate
When Loans Become “Family Debt”
Under FLA section 86, family debt includes all financial obligations incurred during the relationship, regardless of purpose or who benefited. As Schneider v. Owers clarified, citing Bishop v. Wang, these factors may go to unequal division arguments under section 95, but they don’t determine whether debt qualifies as “family debt” in the first place.
The spouse asserting a parental “loan” exists bears the burden to prove it’s a real loan (not a gift) on the balance of probabilities—and as multiple cases show, vague arrangements without documentation simply don’t meet this standard.
The Bottom Line
Family dynamics and legal reality don’t always align. Many parents—particularly in cultures where financial support for children is expected—may believe their intentions are obvious. But BC courts demand clear, contemporaneous evidence and consistent conduct.
Whether excluded property remains excluded or becomes family property is a question of fact, determined by the transferring spouse’s intention. The time to protect your family’s interests is before the transfer happens, not after the relationship breaks down.
This article provides general legal information only and does not constitute legal advice. For guidance on your specific situation, consult with our experienced family lawyer, George Lee..