Are Gifts Given to your Child Also Gifts to your Child’s Spouse When They Split?

Written by Kylie Walman, Associate

Cabezas v. Maxim, 2015 BCCA 82 – Chiasson, Garson, Goepel, J.J.A.
In BC, gifts given to one spouse by a third party (like a parent) are not considered family property and the spouse who received the gift keeps it when the couple splits.  But what happens when the other spouse says the gift was also intended for him/her – particularly where the gift is payments made on the couples’ mortgage by one of their parents?  That was the question for the British Columbia Court of Appeal in Cabezas v. Maxim, 2015 BCCA 82, released on February 25, 2016.
In Cabezas, Mr. Maxim’s mother made substantial mortgage payments to pay off the couple’s home – which was in joint names.  The parties sold the home after they split and the issue of the mortgage payments was important to determine how much each party would get out of the sale of the home.  Mr. Maxim argued that the mortgage payments were gifts to him alone – as an advance on his inheritance – and he should get back all of that money.  Ms. Cabezas argued that the payments were gifts to both of them and the sale proceeds should be divided equally. 
The Court held that the intention of the parents at the time the gift was given is what matters in deciding whether the daughter-in-law should benefit.  Although Mr. Maxim’s mother testified that she intended the payments to be an advance on her son’s inheritance, the Court didn’t accept that evidence.  Instead, the court noted that the house was in both names; Mr. Maxim’s mother didn’t say the gift was for her son alone; and she gave similar gifts to her other children and their spouses.  So, at the time of the gift, the court found that Mr. Maxim’s mother didn’t think about whether it would benefit her daughter-in-law, she simply wanted to help her son out with his expenses.  The Court concluded that the gift was for both spouses and the sale proceeds were divided equally.
 If you wish to give your adult children substantial gifts and want to keep their spouses from benefiting if the marriage breaks down – you need to ensure your intentions, at the time the gift is given, are stated clearly and in writing.