My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. My posts are blunt, opinionated and even have a twist of humour/sarcasm. You've been warned. Please note the blog posts are time sensitive and subject to changes in legislation or law.

Monday, November 1, 2021

Gifting or Loaning Money to your Children to buy a Home

Last week, CIBC Economics released a report titled “Gifting for a down payment -perspective” by its Deputy Chief Economist, Benjamin Tal. The report provides a wide range of statistical data in relation to the value and type of gifts parents are providing to their children to purchase houses.

Some of the key statistics in the CIBC report include the following:

1. Over the last year, CIBC estimates gifting totaled just over $10 billion for family member house purchases, which accounts for 10% of total down payments in the market as a whole for that period

2. Almost 30% of first-time home buyers received assistance from family members 

3. The average gift is now approximately $82,000 

4. Where the gift is the primary source of the down-payment, the gifts average $104,000 for first-time home buyers no less than $157,000 for mover uppers 

5. CIBC reports that only 5.5% of the gifting parents used debt to finance the gifts (that percentage rises substantially for gifts for homes in Vancouver and Toronto) and therefore it appears parents are using their savings to make these gifts

Whether a gift is $50,000 or $200,000, the amounts are substantial and many parents never planned or conceived of gifting such large amounts of their savings. Whether parents are encroaching upon their retirement savings for these gifts is an interesting topic for another day.

However, what I want to discuss today is; whether some parents should be making loans in lieu of gifts, to protect their family money under the various provincial family law acts (in the case of a marital breakdown), where the child will use the gift to buy a home.

Before I go any further, I want to note that I am not a family lawyer. This blog post is general in nature and should not in any manner be considered as legal advice. This blog is being posted to caution parents who are considering making a housing gift to seek family law advice before doing such. I say this because not only is the family law complicated in regard to monies used to purchase a matrimonial home, but the question of whether the monies are better made as a loan versus a gift is a legal minefield of its own. I humbly suggest the legal costs will be worth the piece of mind and/or the potential financial savings to the family.

Gifts vs Loans

Where there is a marital breakdown, one of the key issues in respect of money given to a child to purchase a home is whether the money was a gift or loan. That characterization can be the difference between a family keeping or losing thousands of dollars. I will assume for purposes of this discussion, there is no pre-marital agreement dealing with this issue, which is often a suggested option by lawyers, but very rarely acted upon.


Family lawyers (in Ontario) have told me, that in general, gifts or inheritances received during a marriage that are kept separate from the family property will typically be excluded property and not be considered family property subject to division (I am not aware if all the provinces have the same general rule, you will have to check with a family lawyer in your province). Thus, children are often told by their lawyer or their parent’s lawyer to keep a gift or inheritance invested only in their name and not to co-mingle these funds in a joint spousal bank/investment account or pay joint expenses. I have also been told however, that if a gift is used to buy a matrimonial home, it will no longer be excluded property. Again, confirm this all with a family lawyer.


A loan would typically be secured by a promissory note, which lawyers have told me in general should be deducted as a liability as net family property. Sounds simple, but as per this article "Promissory Notes Between Parents and Their Married Children" by Nathalie Boutet, Managing Partner, Boutet Family Law & Mediation, properly documenting and executing a promissory note is far from just writing a note out on a piece of paper. The importance of legal advice is further strengthened when you read in Ms. Boutet’s article that a debt can be discounted even if a promissory note is valid and has not been forgiven, if there is a low probability that the parents will collect it. Ms. Boutet notes the discount can be as high as 90%-100% making the promissory note effectively a gift.

Legal Interpretation of a Gift vs Loan

But what constitutes a gift vs a loan? This is far beyond the scope of this post, but the case of Barber v. Magee, 2015 ONSC 8054 (Ont. S.C.J.) provides some clarity of the documentation required for a family transfer to be categorized as a loan. The characterization of whether funds advanced are a gift or loan are detailed in this law firm’s summary, "Inter Family Gifts vs. Inter Family Loans". As I understand this as a layperson, in this case the husband received $157,000 or so from his father which was used to purchase the matrimonial home and pay for other costs. The husband argued the $157k was a loan he still had to repay, and it would still form a liability and be deducted from his net family property. 

The wife argued the funds were a gift and since the funds were used to purchase the matrimonial home, the husband had to record the house as an asset to be split as part of the family property. The courts held the funds were a gift.

It was my intention in writing this post to:

1. Reflect the complexity of family law and the jurisprudence in respect of whether funds given to a child are a loan or gift 

2. Urge you to consult a family lawyer before making a gift or loan to your child/ren to help in buying a house, since as the CIBC report reflects, 30% (likely rising even higher) intend or will be asked to assist our children in buying a starter or mover upper.

I hope I accomplished these objectives.

Bloggers Note: On my @bluntbeancountr Twitter account, a tax expert tweeted that the last couple times their clients wanted to reflect monies from the parents as loans for house down payments, the banks instead requested a written parental declaration that the funds transferred were a gift (this is related to the payment tests for CMHC and mortgaging) and they were unable to use a promissory note loan backed by a 2nd mortgage. You should discuss this upfront with your real estate and family lawyer and bank to see if this is problematic in your case.

This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation. Please note the blog post is time sensitive and subject to changes in legislation or law.


  1. Wow, dangerous waters. I think I'd rather set up some sort of retirement fund for the kids and let them blow their own budget on real estate with their partner. I just read The Rule of 30 by Fred Vettese which makes lots of sense to me. Go crazy with the house, don't focus so much on retirement savings and then the Bank of Mom and Dad will use the money that would have given to you for the house to jump start retirement savings. At least the money will be there even if the relationship doesn't work out.

    1. Thx Larry. I have not yet read Fred's book, but understand that approach. The issue I have experienced is many parents want to provide immediate help to their children, so we are back to the loan or gift.

  2. The Boutet white paper briefly mentioned securing a mortgage as a stronger alternative to a promissory note. I guess the downside of parents holding a mortgage on the child's property is that now the child has two mortgages and the bank may not like that.

    1. correct - also note, that a tax person on twitter said that the banks are starting to require a parental declaration that funds so transferred are a *gift* and NOT a loan - that can be problematic.

  3. I think it is productive to give your children money to buy their first home. It's a good way to distribute their inheritance before you die and it is useful because I don't think it is possible for our kids to buy their first homes without our contribution. Giving money to your kids before you die in terms of a down payment on a property keeps your estate small and efficient. As it should be when you die.

    What happens to the gift after you give it is really not important. The future is unknown to us. The good a gift can do to provide a place where your offspring can live--- is immeasurable. Lenders require parents to fill in and sign forms specifying their contribution is a gift; we had to do this for our older son. Once the gift is given, it's no longer our concern.

    My father gave a gift to me so that I could buy my first home. I was only able to buy my first home because of that gift. I am grateful to my father for helping me to have a decent place to live while I finished my MSc. It meant I had a place to live all through my degree rather than moving from one rental apartment to another. It meant stability.

    I also think it's useful for parents to start life insurance on their kids early on. My dad did this for me and it has been quite helpful. I am a stay at home mum now and having this life insurance started by my dad and continued by me has meant that I will be able to leave a small amount of money split between my two sons when I die. I don't think I could have otherwise contributed to their financial well being. I could make my husband the beneficiary of my insurance policy but I think it's more useful for my sons to have this small gift after I die to protect them from the ongoing instability in the employment sector. It will form part of their emergency funds once the bank of mum and dad closes.

    Giving gifts and starting them on an insurance policy takes money out of our hands and increases the difficulty of saving for retirement. We didn't do the insurance policy for my older son because of the costs and he didn't want to pay for it. I did start an insurance policy on my younger son and he is now paying for the premium. Hopefully he will continue to pay for the premium. An insurance policy independent of the job insurance is a helpful matter when he will get married and have kids.

    I didn't mean to write a blog post but I think in today's economy it's very difficult to be financially fit. In helping our kids become financially fit, parents may not accumulate as many assets as they could have. Certainly my dad has fewer assets because he helped each of his five kids. Parents do delay their own financial asset building by helping their kids with gifts and insurance policies. But if you are frugal and self disciplined as parents (and your husband is earning enough as in my case) you can help your kids in small ways so that they are launched debt free in terms of their college or university education, and with a gift they can live in stable conditions with a decent quality of life. The insurance policy is there if they cannot get insurance at a later time in their lives.

    I also encourage my sons to put money into their TFSA and RRSP accounts. Early contributions may be difficult to do but makes all the difference later on. The only thing I haven't been able to accomplish is getting them to cook all their meals at home and save money on take out meals which are a waste of money.

    1. Hi Julie, thanks for your detailed comments. I have no issue with parents who are certain they can afford it gifting money while they are alive (note I said certain, parents need to be careful of impinging on their own retirement funds),in fact I have written a blog post on it previously (unfortunately it was a guest post for a blog no longer in existence so I cannot link it)and discussed partial inheritances multiple times as a way to assist children (houses, schooling) or as a family vacation to bond the families and create lifetime memories). However, in this post, I wanted to ensure parents consider the family law consequences prior to making a gift.