Buying Property With Your Child: The Impact of Family Law Claims on Ownership Under Section 26 of the Family Law Act 

• 
  Aaron Ender
  Lawyer

Given the current real estate market, it is becoming more common for parents to finance the purchase of their adult children’s homes and to remain on title with their child as “joint tenants”. 

When the adult child moves into the home with their married spouse, it becomes their matrimonial home. The spouses may then make arrangements regarding the matrimonial home via a Will, Marriage Contract, etc. 

If the adult child dies while remaining joint tenants with their parent, this can pose significant legal issues between the parent and surviving spouse.

Who Owns the Property When the Adult Child Dies?   

When an adult child dies in these circumstances, what happens to the ownership of the property? 

The Family Law Act (“FLA”) offers an answer to this problem. Section 26(1) of the FLA states that “if a spouse dies owning an interest in a matrimonial home as a joint tenant with a third person and not with the other spouse, the joint tenancy shall be deemed to have been severed immediately before the time of death”. 

The effect of this clause is to eliminate the “right of survivorship” between the parent and the adult child that would typically arise by virtue of being joint tenants. Instead, they are deemed to be “tenants in common” such that the deceased’s interest in the matrimonial home does not automatically pass to the parent on title. 

In effect, the parent on title will retain their interest in the home, but the deceased’s share in the home will pass to their estate and may be disposed of in accordance with their Will or the applicable estate legislation. In many cases, the deceased’s share of the home would pass to their married spouse rather than returning to the parent who funded the purchase.

Can the Parent Recover the Adult Child’s Share of the Property?  

The parent and spouse of the deceased may disagree about the other’s entitlement to the property.  

On one hand, the parent financed the purchase of the home and expected to receive the deceased’s share of the property in the event of an untimely death. On the other hand, the surviving spouse may have expected the receive the property by virtue of the deceased’s Will.  

In some cases, the parent may be able to claim against the estate for the deceased’s share of the property. 

For example, in Kent v Kent,¹ the court found that the parent had an interest in the deceased’s share of the home by virtue of a “resulting trust”. A resulting trust is a legal presumption that arises when title to a property is in a party’s name, but that party gave no consideration for the property. In these cases, the court may order that the property belongs fully to the purchaser unless the presumption can be rebutted by proving that the transaction was a gift. 

The court held that when a resulting trust is found, then section 26(1) of the FLA does not apply because the deceased child did not actually hold an “interest” in the property.  

In effect, the court determined that the entire property belonged to the parent, despite the parent and adult child being jointly on title to the home. As a result, the deceased’s share of the property passed to the parent rather than the surviving spouse.  

How to Prevent This Issue   

While the surviving spouse in these cases may remain in the property rent free for sixty days after the spouse’s death,² this is little comfort to a spouse who believed they were entitled to retain the property under the deceased’s Will.  

As in many family law disputes, these issues can be prevented through proper planning.  

First, the parent and child can document whether the parent’s purchase of the property was a gift or a loan. This can eliminate ambiguity surrounding whether there is a resulting trust. 

Second, the adult child’s Will can be drafted to align with the parent’s and child’s intentions at the time of the purchase. Similarly, the adult child can enter into a Marriage Contract with their spouse, which specifies how the property will be disposed of in the event of a death or separation. 

In the absence of proper planning, parties may find themselves in the midst of a challenging and costly legal dispute.  

Conclusion   

This article was written by Family Law Lawyer Aaron Ender. For additional information, please do not hesitate to contact aaron.ender@mckenzielake.com.  

If you require assistance with any Family Law matter, speak to a Family Lawyer at McKenzie Lake Lawyers LLP by calling (519) 672-5666. 

1. ¹ 2019 ONSC 6873, upheld in 2020 ONCA 390.  ↩︎