Trevor Todd and Jackson Todd have over 65 years of combined experience in handling estate disputes.

 

GIFT LETTERS – FINANCIAL INSTITUTIONS AND FAMILY MEMBERS

Introduction

Few people in British Columbia (“BC”) these days can afford to buy their first home without some form of family assistance, usually the parents. When this occurs, mortgage lenders invariably insist on a “gift letter” from the parents or other family members advancing funds. The gift letter clearly states that the funds being advanced are a gift and that repayment is not expected.

The legal principle that these letters often interact with is the presumption of a resulting trust. When parents make a gratuitous transfer of property or funds to an adult child, equity presumes a bargain; meaning that the child (and his or her spouse) hold the property for the benefit of the parent (or if the parent dies, for the benefit of the parent’s estate).

The presumption of a resulting trust can be rebutted with evidence that the parent’s true intention was that the transfer was a gift. Since the lending institution’s gift letter clearly indicates that the property was a gift, the adult child or the former spouse of the child may try and rebut the presumption of a resulting trust and hold onto the value of the funds that were transferred to them.

This creates a legal dilemma if the point of the gift letter was actually to assist the child and/or the child’s family to get a mortgage. The entire system of mortgage lenders relies on gift letters so that they need not worry about the family members claiming back against the institution. On the other hand, it may be unfair to the adult child or the family if expectation of repayment of some repayment to use the gift letter to defeat what was intended within the family itself.

The law and legal framework surrounding gift letters in BC spans two distinct areas:

1. mortgage underwriting requirements, and
2. family/estate law disputes.

 Requirements for Mortgage Lenders

From a lending perspective, mortgage institutions such as banks and insurers (such as CMHC) have strict rules regarding gift letters:

• Non-Repayable: The defining legal feature of a gift letter is a formal declaration that the funds are an outright gift and do not need to be repaid. If the money is actually a loan, it increases the borrower’s debt-to-income ratio, which can disqualify them from getting a mortgage or reduce their borrowing limit.
• Eligible Donors: Lenders typically require that the gift come from an immediate family member (such as parents, grandparents, or siblings). Gifts from friends or non-immediate relatives are heavily scrutinized or often rejected.
• Lender-Specific Forms: Banks and brokers generally require the use of their own proprietary gift letter templates rather than a generic internet form.
• Paper Trail and Timing: Lenders want to see a clear audit trail. They frequently require proof that the funds have been deposited into the buyer’s account (often 15 to 30 days before closing, or sitting in the account for a 90-history window depending on the lender’s anti-money-laundering policies).

The Legal Reality Between Family Members

A common pitfall in BC is treating a mortgage gift letter as a complete, all-encompassing legal document for the family, when it is really just designed to satisfy a bank.

BC courts have established important nuances regarding what a gift letter actually means legally:

• The Bank vs. Family Distinction: A gift letter is binding regarding the lender—meaning the donor cannot later legally turn around and sue the buyer for repayment based on a secret handshake deal, because they explicitly promised the bank it was a gift.
• Presumption of Resulting Trust: Under BC property and estate law, if a parent transfers large sums of money or property to an adult child without clear documentation, the law often presumes it is not a gift, but a “resulting trust” (meaning the parent or their estate still retains a beneficial interest in the property).
• Not Conclusive for Estates or Spouses: BC courts have ruled that a mortgage gift letter is only one piece of evidence when determining true intentions. In family law disputes (such as a messy estate probate matter or a separation from a spouse), a gift letter written exclusively to appease a bank does not automatically block a parent’s estate or family members from arguing that the funds were meant to be an advance on an inheritance, a loan, or a shared equity stake.

The decision of Kirkwood Estate v Whitefield, 2026 BCSC 1265 is illustrative of how the BC courts analyse a situation where a parent advanced substantial sums to a child and her spouse who were unable to raise mortgage financing on their own. The daughter’s mother had to sign a gift letter in favour of a lending institution in order for a mortgage to be raised.

A home was purchased and the parent lived in an in-law suite and assisted with child care. However, upon marital separation, the home was sold for substantially more than the initial purchase price, and the spouses claimed that the funds advanced by the parent were a “genuine gift” that did not require repayment, and they relied upon the gift letter to support their position.

The court found that while the gift letter was a binding representation that would defeat any equitable claim against the mortgage lender or other at arm’s-length creditor, it was at best weak evidence of an actual intention of the parent to make a gift to her son and his spouse. The court found that there was presumption of a resulting trust that was not rebutted and the totality of the evidence showed that the parent intended to be paid back when the property was sold and to share in any appreciation in its value.

Similarly, in Bostrom v Bigford, 2019 BCSC 79, an aging parent advanced funds to an adult child and her spouse from funds that she realized from her divorce. The married couple were unable to qualify for mortgage funding on their own and asked the parent for financial assistance in purchasing a home. A gift letter was signed by the parent in the conveyancing lawyer’s office with no independent legal advice given and no explanation as to why it was required. The parent expected and mentioned that she was to be registered on title but she was not.

At the time of the purchase the parent was 64 years old, and unemployed with nominal pension funds. The parents had spent most of her divorce settlement in assisting her daughter and son-in-law purchase a house that she was not on title to.

The parent was “stupefied” that the conveyancing lawyer had asked her to sign a gift letter without explanation, and that she was not told why she had not been registered on title, especially when she had paid $532,742 to purchase the home. The adult children had no money of their own and could not qualify for financing, although they lied to the parent and told her that they had secured financing and would pay the mother back over time.

The parent moved into an in-law suite in the home but her daughter began to make life so difficult that she had to move out.

The court action was commenced and the daughter and son-in-law relied upon the gift letter as a defence to the mother’s claim for a vesting order to put her name on title rather than the names of the adult children. They also relied upon S. 23(2) of the Land Title Act that provides that title is conclusive evidence that the title holder named as the registered owner is indefeasibly entitled to an estate in fee simple to the land.

This statutory presumption can be rebutted if there is a resulting trust.

 

As in the Kirkwood decision, the court held that there was a resulting trust and granted the vesting order in favour of the parent who had advanced all the purchase funds. The court found that the parent’s bare signature on the gift letter was not determinative proof of her intention to make a gift.

The court found that on the whole of the evidence the parent had paid for the entire purchase price of the house, and she thought she would own it. The adult children had manipulated the parent’s generosity by inter alia telling her that they would have no place to live if the sale did not complete, and the parent mistakenly trusted and had confidence in her daughter to protect her interests.

The Law

Presumption of Advancement Between Parents and Adult Children

There is no presumption of advancement between parents and adult children (Pecore v Pecore, 2007 SCC 17). Transfers between parents and adult children are presumed by equity to be bargains and not gifts. The presumption of a resulting trust persists regardless of the adult child’s financial dependency on the transferor-parent.

Pecore did acknowledge that there will be situations where a transfer between a parent and an adult child was intended to be a gift. To find that a gift occurred requires evidence brought to rebut the presumption of a resulting trust. The evidence must be strong and may depend upon the degree of dependency of an adult transferee child upon the transferor parent.

Gratuitous Transfer and Resulting Trusts

A resulting trust arises as a matter of law when someone transfers property of value to someone else without being legally obliged to, without receiving value in return (consideration), and without having any intention of making a gift. While such transfers are effective at common law in the sense that they transferred legal title, the transfer does not change the ownership in equity. Since the result of the transaction is that the transferee has the legal title, while the transferor retains the beneficial or equitable title, gratuitous transfers without donative intent automatically and without the need for a court order, create a resulting trust in the transferred property.

There are two species of resulting trust triggered by gratuitous transfer.

The first species of gratuitous transfer resulting trust arises when one party gratuitously transfers all or part of his or her interest and held property to another. Equity presumes bargains, not gifts. A transfer will be gratuitous if the transferee does not provide consideration at the time of the transfer.

The second species of gratuitous transfer resulting trust involves one party using his or her money to purchase property, and that property subsequently being put into another party’s name or in the joint names of the purchasing party and the other party.

As noted in Kerr v Baranow, 2011 SCC 10, “it has been settled law since at least 1788 in England that the trust of a legal estate, whether in the names of the purchaser or others, results to the person who advances the purchase money.”

A resulting trust on the basis of purchase in the name of another has two key elements:

1. the transfer must show that she or he was the one who provided the purchase money; and
2. the transferor must satisfy the court that he or she was acting as a purchaser him or herself through the transaction, ie, that he or she was putting up the purchase money. The transferor must not have been putting up the purchase money as a loan to the other proper party who now holds title, or through the transferor having joint title. If the party who put up the money was doing so is a loan to the other party, the relationship is creditor-debtor, and resulting trusts do not apply.

 

Rebutting the Presumption of Resulting Trust

If the court finds a resulting trust, the transferee may rebut that presumption by showing on a balance of probabilities that the transferor intended to make a gift. As stated in Pecore at paragraph 44, the trial judge will commence his or her inquiry with the applicable presumption and will weigh all of the evidence in an attempt to ascertain on the balance of probabilities, the transferor’s actual intention.

In Rascal Trucking Ltd. v Nishi, 2013 SCC 33 at para. 41, the court stated that the presumption will only determine the result where there is insufficient evidence to rebut it on a balance of probabilities. Evidence that arises subsequent to a gratuitous transfer can be admissible to show that the true intention of the transferor, however, it is the intention of the transfer at the time of the transfer that is determinative. The difficulty with subsequent evidence is that it may well be self serving or the product of a change in intention on the part of the transferor.

If the transferee establishes on a balance of probabilities that the transferor intended to make a gift, the presumption of resulting trust will be successfully rebutted.

There are other cases of parents or family members who advanced funds to adult children for home purchase financing and having to sign gift letters, such as Chang v Xia, 2015 BCSC 1994 and Dhaliwal v Ollek 2012 BCCA 86. In cases like Chang and Dhaliwal, the courts have applied the same reasoning that the gift letters were of no assistance in determining whether the parent had the necessary intention to defeat the presumption of resulting trust, because the letter was provided to the bank to assist the adult children and qualifying for a mortgage. In each of those cases, the court gave little weight to the gift letter and found that there is a resulting trust in each situation.

Conclusion

Because it is not an uncommon situation for a family member, usually a parent to advance all or part of the down payment in a home purchase, mortgage lenders typically insist on a gift letter from the person advancing the funds. This is so the parent cannot subsequently argue that they have a beneficial interest or debt competing with the mortgage debt in a foreclosure or bankruptcy.

In such cases, the court has given little weight to the gift letter and have found that there is a resulting trust. The gift letter cases generally are stating that the willingness of the family member, advancing the funds to have that lender or other strangers treat them as the donor, does not imply a willingness to let the other family members treat them that way. So while standard form gift letters are determinative of intent with respect to the lender and other strangers to the family or friends circle, and absence of a defense, they are only evidence of intent within that circle, and given the context of obtaining a loan, often are not very strong evidence in the larger legal sense.

The courts will recognize that in some cases the gift letters really do indicate an intention to make a gift, including within the family or friend unit, however, those cases will be unusual, and there will usually be some corroborative evidence that the gift letter was meant within the family circle itself. In such situations, the court will examine the context of all of the evidence. For example, if arrangements for repayment are made such as a repayment schedule, as would be expected in the case of a loan, secured or otherwise, then that corroborative evidence might be sufficient to rebut the presumption of a resulting trust.

While a legal dilemma may arise from time to time concerning gift letters  the courts in recent years  have become more willing to find a resulting trust when family member s advance funds for other family members to purchase  a home despite the clear wording of the lender’s gift letter that the funds are being advanced as a gift.