When parents provide financial support to their adult children, is it a loan or a gift? While the question might seem straightforward, the assessment can be much more nuanced where clear documentation is lacking. Where families find themselves in disagreement, the implications can be significant personally, practically, and financially.
Presumption of a Resulting Trust
In British Columbia, where a parent advances funds to their adult child, those funds are presumed to be held in a resulting trust in favour of the parent, and the adult child is obliged to repay them. The presumption is based on the equitable principle that “equity presumes bargains, not gifts”. It is the burden of the adult child to prove that the transfer was intended as a gift rather than a loan.[1]
This is different than transfers from parents to minor children, where the presumption is that advances are meant to be gifts.[2]
Factors to Consider
The intention of the parent at the time of the transfer to an adult child is critical in determining whether the financial support constitutes a loan or a gift. The Court must consider all the evidence and surrounding circumstances to make a determination. The factors considered by the Court in making a determination include, but are not limited to whether:
- contemporaneous documents suggest a loan;
- repayment terms were specified;
- security was held for the loan;
- advances were made to one child and not others;
- there was any demand for repayment;
- there was partial repayment; and
- there was an expectation, likelihood or repayment.[3]
The Court will only rely on the legal presumption of resulting trust if it is unable to determine the transferor’s actual intention at the time of transfer.[4]
While each of the above factors may assist in an assessment of a loan versus gift dispute between parents and their adult children, the Court has stressed that the unique facts of each case are important in making a determination.[5] The credibility of witnesses is also integral to the Court’s assessment of the evidence. Ultimately, a case-by-case analysis is required.
[1] Pecore v. Pecore, 2007 SCC 17 (“Pecore”)
[2] Fulton v. Gunn, 2008 BCSC 1159;
[3] Locke v. Locke, 2000 BCSC 1300; B.F.W. v. F.P., 2025 BCSC 975.
[4] Pecore at paras. 23, 43-44; Creyke v. Creyke, 2016 BCCA 499 at para. 53.
