Loan or Gift In the Family Context?

Loan or Gift In the Family Context?

It is often very difficult to distinguish between loans and gifts in the family context.

This has become a particularly common problem in recent years with the dramatic increase in the value of properties, and parents attempting to this assist their child and partner in the financing of a residence.

The problem arises, typically when the child and his or her partner separate and dispute whether monies advanced by parents were loans or gifts. The parents typically never gave it a moments thought when the monies were advanced, other than in the back of their minds, they likely expected to be repaid if their child and partner separated.

Rarely are such transactions properly documented, and thus litigation can arise as to whether the monies advanced were a loan or a gift.

Several factors were addressed in Kuo v Chu 2009 BCCA 405 at paragraph 9, where the Court of Appeal adopted the factors described in Locke v Locke 2000 BCSC 1300 as applicable to the question of whether a loan or gift was intended:

1) Whether there were any contemporaneous documents evidencing a loan;
2) whether the manner for repayment is specified;
3) whether there is security held for the loan;
4) whether there are advances to one child and not others, or advances of unequal amounts to various children;
5) whether there are has been any demand for payment before the separation of the parties;
6) whether there was any expectation, or likelihood of repayment.

The two aforesaid cases were recently followed in Zellweger v Zellweger 2018 BCSC 1227.

In R.(MF) v R (BP) 2010 BCSC 1063 , the court concluded that no loan was made in circumstances where there was no contemporaneous documents are promissory notes produce to explain why money had been advanced. The repayment was never discussed with the wife, no security was given, no demand was ever made before separation, and no money was repaid to the husband’s father.