As the saying goes, family is always there for us, and we all need the help of our family members at different stages of our lives. From the moment we set foot in the society, our parents will buy us our first house or give us the start-up capital to start our own business, regardless of the return. As time goes by, we need our children to take care of our large estates and hold our hands until the end of our lives, when we are old and gray...
In Western society like Canada, there are a lot of potential legal issues involved with family members helping each other. If you help a family member out of sheer enthusiasm and disregard the potential legal consequences of the act, the story may not end as beautifully as a fairy tale. In our traditional Chinese mindset, it may even seem unsympathetic to put all the details of our dealings with a family member in writing. This is certainly understandable - for example, when I, as a mother, help my son with the down payment on his wedding house, why do I have to have legal documents or records? It was a gesture of love that I gave to my son as a mother, and I wasn't asking for anything in return. However, the law often surprises people in the most unexpected and unpleasant ways.
The B.C. Family Law Act governs how property and debts are divided when spouses separate. While all the rules of division are not exhaustive, the general idea is that spouses must generally divide all of their property and debts equally upon separation, unless the court finds that the division would be grossly disproportionate. However, there are some important and common exceptions to this general rule of equalization: all personal property owned by a spouse prior to the start of the relationship, inheritances, gifts from third parties, as well as settlements of certain legal disputes and insurance proceeds, are considered to be the spouse's separate property (“excluded property”), and spouses will not be required to share this separate property with the other spouse upon separation.
Returning to the example of the mother putting a down payment on her son's house, if the children's marriage breaks down, it is likely that the issue of whether the mother's down payment is the children's separate property will be a point of contention between the spouses. Under B.C. family law, whoever claims that a piece of property is separate property has the burden of proving it, and a no-holds-barred battle often begins.
In the example of the matrimonial home, the woman could argue that the down payment was a joint gift from her mother to both spouses, and that the home was registered in both spouses' joint names, and therefore should not be treated as the man's separate property. Conversely, the man may not only argue that the down payment was a gift from his mother to himself and not to the couple, but may also maximize his interests by arguing that the down payment for the house was in fact a loan from my mother, which is a debt that both parties will have to assume after separation. Without the relevant legal legal documents to prove what both parties are saying, the outcome of this case will be unpredictable.
Let's take another example. The daughter is attending school in Canada and the parents, who are settled in China, register the property in the child's name to facilitate the child's management of the property, or give the house to the child to live in but do not transfer the beneficial ownership. In other words, the parents want their daughter to hold the property in trust for them.
In other words, the parents want their daughter to hold the property in trust for them, but the daughter is not the owner of the property. In this scenario, if the legal relationship between the parent and the child in relation to the house is not documented in black and white, then in the event that the daughter separates from her spouse at a later date, the problem arises again when it comes time to divide the property.
After the couple separates, the man can argue that the property was a gift from the other parent to their daughter, and any appreciation in value of the gift over the course of the relationship will be divided equally. The Land Title Act creates a presumption that the person in whose name the real estate is registered is the true owner, so in this example, the daughter would need to prove that the parents are the true owners after the separation from the man. This would be very difficult without proper legal documentation.
The hypothetical scenario in the above book is actually extremely common in reality. It is often very costly and arduous to prove that a down payment on a house is a gift from a parent to their child, rather than a joint gift to both spouses, or when a property is registered in your child's name for ease of administration, you will need to go through an extremely burdensome court process to prove that you are the true owner of the property. If a lawyer is unable to obtain an authoritative legal document that confirms the true nature of the transaction, it is often the case that you will have to spend a great deal of time and money in court. The cost of a professional legal document such as a cohabitation agreement or declaration of trust is a drop in the bucket compared to the cost of litigation. And if the lack of a professional legal document results in a loss of the case, the cost is even more staggering.
These unfortunate scenarios are not accidental, and by the time the legal consequences are recognized, it is often too late. If you need to transfer a large amount of property to another person, we can help you analyze the potential legal risks of such a move and some of the steps you can take to prevent them.
Please also note that the information in this article is not a substitute for legal advice. As the saying goes, 10,000 people have 10,000 Hamlets, and each case is not similar, so in order to analyze your situation and maximize the protection of your interests, if necessary, please contact our firm to schedule a consultation with a professional lawyer.