The Critical Difference Between Parental Gifts and Property Held in Trust Under BC’s Family Law Act
George Lee • George Lee Law • gleelaw.comFamily Law | Property Division | BC
Two Families, Two Very Different Outcomes
Here’s a situation I see regularly in my practice. Two couples are separating. In both families, the parents were generous during the marriage. In both cases, the couple used the parents’ money to buy a home. And in both cases, the spouse on the receiving end assumed the arrangement protected them.
But at trial, the outcomes were dramatically different.
In the first family, the parents gave their daughter $500,000 as a wedding gift. She used it as a down payment on the family home. When the marriage ended, the court excluded the $500,000 from family property — she got her money back, and only the increase in value of that amount was divided.
In the second family, the parents transferred a condo into their son’s name. But the parents never intended to give it away. They were aging, they wanted estate planning simplicity, and they assumed their son was just “holding” it for them. When the son’s marriage broke down, his wife claimed the condo was family property. The son argued it wasn’t his — he was holding it in trust for his parents.
If he succeeded, the condo would be removed from the family property pool entirely — not a dollar of it would be divided. If he failed, the entire value was on the table.
The difference between these two outcomes comes down to a legal distinction that most people — and even some lawyers — don’t fully appreciate: the difference between a gift from a parent and property held in trust for a parent.
The Common Mistake: Treating These as the Same Thing
When families help their adult children financially — whether through cash transfers, adding children to property title, or buying homes in a child’s name — the legal nature of the arrangement is often never discussed. Parents and children alike tend to operate on assumptions: “Of course it’s a gift,” or “Of course I’m just holding it for them.”
The problem is that these two arrangements produce completely different legal consequences when a marriage or common-law relationship ends. And the Family Law Act doesn’t care what anyone assumed. It cares about what the evidence shows.
| ⚠️ The Pitfall If you received money from your parents during your relationship and you call it a “gift,” the principal is excluded from family property — but any growth in value during the relationship is divisible. If you hold property in your name but claim it’s “really your parents’,” and the court agrees, the property is not yours at all — it’s entirely outside the FLA. But if the court doesn’t believe you, the entire value is family property subject to 50/50 division. Getting the characterization wrong can cost hundreds of thousands of dollars. |
The Legal Truth: Two Completely Different Legal Animals
What Is a “Gift” Under the FLA?
Under s. 85(1)(b) of the Family Law Act, gifts to a spouse from a third party are excluded property. This means the principal value of the gift is protected from division. The recipient spouse owns the property outright — both legally and beneficially. But under s. 84(2)(g), any increase in value during the relationship is family property, divisible equally.
To establish that property was received as a gift, the spouse claiming the exclusion must prove two things: (1) the parent intended to make a gift; and (2) the gift was delivered to the child. In addition, the spouse must be able to trace the gift into current assets — a separate evidentiary requirement for maintaining the exclusion under the FLA. The standard of proof is the civil standard — balance of probabilities — but courts insist on clear and cogent evidence.
Critically, since the 2023 amendments to the FLA, the old presumption of advancement between spouses has been abolished (s. 81.1(1)). This means that if you used your parents’ gift money to buy a house and put it in joint names with your spouse, you no longer automatically lose the exclusion. New s. 85(3) confirms that excluded property retains its excluded status despite any transfer of legal or beneficial ownership to the other spouse. This was a major change that resolved years of conflicting case law.
What Is Property Held in Trust for a Parent?
This is a fundamentally different legal arrangement. Here, the parent transfers legal title of property to the adult child, but the parent retains beneficial ownership. The child is merely a bare trustee — they hold the title, but the property isn’t really theirs.
In Canadian law, when a parent transfers property to an adult child without consideration (that is, for free), the default legal presumption is that the child holds the property on a resulting trust for the parent. This was confirmed by the Supreme Court of Canada in Pecore v. Pecore, 2007 SCC 17. The rationale, as the Court explained, is that it would be unwise to presume a gift every time a parent puts a child’s name on title, given that so many transfers are done for estate planning or administrative convenience.
If the resulting trust is established, the property belongs to the parents — not the child. Since the child has no beneficial interest, the property should fall entirely outside the FLA’s property division framework. It is not “excluded property” (which still belongs to the spouse). It is simply not the spouse’s property at all.
| Factor | Gift from Parent (s. 85(1)(b)) | Property Held in Trust for Parent |
| Ownership | Child holds both legal and beneficial title | Child holds bare legal title only; parent retains beneficial ownership |
| FLA classification | Excluded property — principal protected, growth is family property | If the trust is established, the property is not the child’s — it falls outside the FLA property regime entirely |
| Growth during relationship | Increase in value is family property, divisible 50/50 (s. 84(2)(g)) | No family property interest arises — neither principal nor growth is divisible |
| Burden of proof | Spouse claiming exclusion must prove it with clear and cogent evidence (s. 85(2)) | After Pecore, the presumption favours the parent; adult child must rebut to claim beneficial ownership |
| Key risk | Co-mingling or losing the paper trail can destroy the exclusion | Inconsistent positions (e.g., claiming ownership for tax but denying it for family law) can undermine the trust argument |
| 2023 FLA amendments | s. 85(3): exclusion survives transfer to other spouse; s. 81.1: presumption of advancement abolished between spouses | s. 81.1(2): presumption of resulting trust abolished between spouses — actual intention must be proved on evidence |
What the Courts Have Said
On Gifts: Zhao v. Fang, 2022 BCCA 227
This BC Court of Appeal decision provides an instructive summary of what counts as a gift. The Court affirmed that a gift is a gratuitous transfer made without consideration, requiring donor intent and delivery to the donee. The spouse claiming the exclusion bears the onus, and while documentary evidence is ideal, courts will scrutinize testimonial evidence for credibility and draw reasonable inferences where needed. (The appeal was allowed in part on other grounds relating to undivided investment funds and income imputation, but the trial judge’s finding on the gift exclusion was upheld.)
A related cautionary tale is Cabezas v. Maxim, 2016 BCCA 82, where parents made substantial payments to discharge the mortgage on the couple’s home. The husband argued the payments were either a loan or an advance on his inheritance given to him alone, and therefore excluded from family property. The Court of Appeal upheld the trial judge’s finding that the payments were a gift to both parties jointly — not to the husband alone — and confirmed that the parents’ intention is assessed at the time of the transfer, not after the fact.
On Resulting Trusts: Pecore v. Pecore, 2007 SCC 17
The leading Supreme Court of Canada authority on resulting trusts in the parent-child context. Justice Rothstein held that the presumption of resulting trust is the general rule for gratuitous transfers from a parent to an adult child. The burden falls on the child to rebut the presumption by proving the parent genuinely intended a gift.
BC courts have consistently applied Pecore. The presumption means that joint bank accounts and properties placed in an adult child’s name are presumptively held in trust for the parent — they form part of the parent’s estate on death, and they are not the child’s property for family law purposes.
The 2023 Twist: Section 81.1 and the Abolition of Both Presumptions Between Spouses
Here is where it gets interesting. The 2023 FLA amendments (Bill 17) abolished both the presumption of advancement and the presumption of resulting trust as between spouses (s. 81.1). This was a welcome clarification — but it creates a nuance that practitioners must understand.
The abolition applies only to property questions between spouses. The Pecore resulting trust presumption still applies in the parent-child relationship itself. So if the question is whether property is held in trust for a parent, Pecore still governs. But if the dispute is between two separating spouses about whether property belongs to one of them or to a parent, neither the presumption of advancement nor the presumption of resulting trust applies. The court must determine actual intention on the evidence.
This means that a spouse who wants to argue “I’m just holding this for my parents” must now come to court with strong, independent evidence of the parents’ true intention. Bare assertions will not suffice.
Practical Guidance: How to Protect Yourself
| 💡 Scenario A: Your Parents Give You Money If your parents transfer money to you as a gift during your relationship, protect the exclusion: 1. Get a written gift letter from the parents at the time of the transfer, confirming the gift is to you alone and not to the couple. 2. Keep the gift in a separate account in your sole name. Do not co-mingle it with joint funds. 3. If you use the gift to purchase property, keep detailed records tracing the gift into the asset. 4. If you add your spouse to the title, know that under s. 85(3) (post-2023), the exclusion survives — but you still need the evidence trail. 5. Consider a cohabitation or marriage agreement that specifically acknowledges the excluded property. |
| 💡 Scenario B: You Are Holding Property for Your Parents If your parents transferred property into your name for convenience, estate planning, or cultural reasons, and the property is truly theirs: 1. Document the arrangement in writing at the time of the transfer. A simple declaration of trust, signed by both the parent and child, is invaluable. 2. Ensure the parents continue to act as the true owners — paying property taxes, insurance, maintenance, and making all decisions about the property. 3. Do not treat the property as your own. Do not live in it as a family home, and do not claim it on your tax return as your personal asset. 4. Be consistent. If you tell CRA the property is yours for tax purposes, you cannot credibly tell a family court it is your parents’. Courts are alert to parties who change their characterization depending on the forum. 5. Understand that under the 2023 amendments, the old legal presumptions no longer apply between spouses — actual evidence of intention will decide the issue. |
| The Golden Rule Whether it is a gift or a trust, the single most important thing you can do is document the arrangement at the time it happens. After a separation, memories fade, motivations shift, and self-serving recharacterizations are common. A written record created at the time of the transfer is worth more than any amount of testimony at trial. |
Don’t Leave It to Chance
Inter-generational property transfers are deeply personal. They involve trust, family obligation, and often cultural expectations that don’t translate neatly into legal categories. But when a relationship breaks down, the court’s task is to apply the law to the evidence — not to honour unspoken understandings.
If your parents have helped you financially — or if you are a parent helping your child — the time to get legal advice is now, before a separation forces the question.
At George Lee Law, we advise clients in English, Cantonese, and Mandarin on all aspects of family property division under the BC Family Law Act, including excluded property claims, trust arrangements, and inter-generational transfers. We understand the cultural dimensions of these issues and can help you protect what matters most.
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Disclaimer: This article is for general informational purposes only and does not constitute legal advice. Every situation is unique, and readers should consult with a qualified lawyer regarding their specific circumstances. The information in this article is current as of the date of publication and may be subject to change as new legislation and case law develop.