Written by: Stefania Rotundu
Are you thinking of helping your adult child purchase their first home? It has become increasingly common in Canada for parents to assist their adult children buying property—whether by contributing an early inheritance toward a down payment or purchasing the home outright and taking title jointly as a means of protecting their investment. However, legal complexities can arise, particularly when the adult child lives in the home with their spouse.
The Matrimonial Home
Under section 18 of the Family Law Act (Ontario), RSO 1990, c F.3 (the “FLA”), a property becomes a matrimonial home if it was ordinarily occupied by a person and their spouse as their family residence at the time of separation. This can have significant complications, particularly in succession law matters.
Property Ownership
There are two common methods of taking title to a property. The first is through joint tenancy, where the joint owners together each own the whole of the asset. The main benefit of a joint tenancy is that when one of the joint tenants dies, their interest passes automatically to the surviving joint tenant(s) by right of survivorship. This can avoid probate and reduce estate administration taxes, as the property does not form part of the deceased’s estate. The second common form of property ownership is as a tenancy-in-common, where each party owns a separate share in the property. Upon death, the deceased’s share passes to their estate and is distributed in accordance with their will or the laws of intestacy.
Section 26 of the FLA: Severance of Joint Tenancy
Property rights become significantly more complicated in a joint tenancy where there is a third party on title to the matrimonial home as result of section 26 of the FLA. According to section 26 of the FLA, if a spouse dies owning an interest in the matrimonial home as a joint tenant with someone other than their spouse, the joint tenancy is deemed severed immediately before death. This transforms the joint tenancy into a tenancy-in-common, meaning that the deceased’s share will pass to their estate instead and be shared in accordance with the provisions of their will or the laws of intestacy. For parents who purchased their adult child’s home, this can significantly alter the expectations of a parent who hoped to recover full ownership of the home upon their child’s death.
Resulting Trust
Despite these complications, there are potential remedies for parents in such situations. When a parent makes a gratuitous transfer of property to an adult child, the law presumes a resulting trust, unless the child can rebut this presumption.1 In Kent v Kent, 2020 ONCA 390, the Ontario Court of Appeal dealt with a similar situation. The mother transferred title of her home to herself and her daughter as joint tenants.2 Although the daughter and her husband moved into the property, making it their matrimonial home, the mother continued to pay all expenses.3 After the daughter’s death, the husband claimed a two-thirds interest in the property.4 However, the Court found that the daughter held title in trust for her mother, and thus did not hold a beneficial interest.5 Consequently, the home was not deemed a matrimonial home, and the husband’s claim failed.
Parents seeking to support their children in homeownership should be aware of the legal implications of joint title, especially in the context of matrimonial homes. Without careful planning, ownership structures may unintentionally expose the property to claims under family law or alter estate distributions. Consulting with a legal professional to draft appropriate ownership and trust agreements can help mitigate these risks and ensure that your intentions are respected.
Contact MUNERA if you are planning to assist in the purchase of real property in Ontario for the interest of your children and need guidance on ensuring that your goals are achieved.
1 Pecore v Pecore, 2007 SCC 17 at para 36.
2 Kent v Kent, 2020 ONCA 390 at para 6.
4 Ibid at para 17.
5 Ibid at para 48.
