Buying a home:

If you are a parent who wants to make a gift or loan to your child, it’s very important to discuss your intentions with your financial advisor before taking this step. A financial projection is an essential starting point that can help you identify certain key factors:

• Is there a surplus in your financial situation?
• If there is a surplus, could you consider making a gift inter vivos to your child while keeping part of the surplus for your own needs, in case of unforeseen circumstances?
• If there is no surplus, could you make a loan to your child that would not jeopardize your financial independence in the years to come?

Together with your advisor, you should review your balance sheet to identify which assets could be sold to make the gift or loan.

At this stage, one of the key considerations is the tax impact of this withdrawal of funds. The choice will depend on your taxable income, which will have already been estimated for the year. 

• If the goal is to generate taxable income for the year, the best option would be to cash out an asset that will create additional taxable income, such as an RRSP withdrawal.
• If you already have a very high taxable income, it would generally be better to cash out an asset that has little or no tax impact, such as non-registered investments with no unrealized gains or a withdrawal from your TFSA.

• For the parent – Since a gift for a down payment usually represents a significant amount, you need to plan the withdrawal of funds in advance. You also need to consider the tax impact of the cashed out assets and determine the best time to make the withdrawal.
• For the child receiving the money – There are no tax attribution rules as long as the child is of adult age.
• Your child’s tax situation could be optimized by maximizing their RRSP, if they have enough contribution room. The additional contribution could then give them access to the HBP (Home Buyers’ Plan). N.B.: The amount must remain in the RRSP account for at least 90 days before being withdrawn for the HBP. This amount must also be repaid to the RRSP within 15 years of the loan.
• Your child could maximize their FHSA (if they have enough contribution room) and then make a qualifying withdrawal to purchase their first home. In this case, the amount withdrawn does not have to be repaid.

Make sure your gift is invested wisely and protected.

• If your child is single or in a de facto union without children, the situation is simple since they are not subject to the partition of the family patrimony and of the matrimonial regime. You could therefore make a cash gift to your child, but make sure that the gift and its origin are properly documented by a notarial deed of gift in the title deed or in the cohabitation agreement, to avoid their having to share it.
• If your child is in a de facto union with children, they could be subject to the new parental union patrimony rules in effect as of June 30, 2025. Your child should therefore ensure that they obtain a notarial deed detailing the gift and its origin to prevent it from being included in the parental union patrimony.
• Whether or not your child is the sole owner, it would be wise to draw up a notarial deed of gift and have the deed of purchase state that a percentage or the entire down payment comes from a gift. These steps would protect the gift, since in the event of divorce or dissolution of the union, property received by gift or inheritance is excluded from the partitionable value of the family patrimony and of the matrimonial regime.

The terms must be clearly established from the outset:

• the applicable interest rate (if any)
• the term of the loan (repayment period)
• the frequency and amount of the loan payments

Since the loan will be used to purchase a personal residence for an adult child, tax allocation rules will not apply, which means that the interest rate could be zero.

• You and your child will need to decide whether you want to make a personal loan or a mortgage-backed loan.
• If the loan is in the form of a personal loan or an acknowledgment of debt, you would have recourse through the courts to recover the amounts owed in the event of default or non-compliance with the terms of the loan. Although this recourse is not desirable, it is nevertheless possible.
• You will also need to determine whether, in the event of the death of your child or your own death, there will be an obligation to repay the debt or not.
• Another factor to consider: will the loan be granted to your child only, or to their spouse as well?
• You could take the house as collateral to ensure repayment of the loan. In this case, the mortgage on the property would be registered and, upon full repayment of the amount or sale of the property, a discharge would be required. The registration of the mortgage and of the discharge involve additional costs, but they ensure that you will be repaid when the property is sold. They also give you access to a hypothecary remedy in the event of non-repayment of the debt or non-compliance with the terms of the loan, and therefore greater protection.
• If your child also has a mortgage with a financial institution, they may need to ask that institution for permission to register another mortgage on the property.

You may decide that in the event of the borrower’s death, the debt would be cancelled, but you may also want the loan to be repaid in full, to you or your estate.

The loan would then become a debt owed by the child’s heirs (the child’s estate) to the parent or the parent’s estate. This issue will need to be discussed between you and your child.

In some cases, you may want to consider selling your own home to your child (if you decide, for example, to move into a retirement home or to buy a smaller house). The gift could then take the form of an equity gift, which would be an amount equivalent to the down payment.

The advantage of this solution is that it does not involve any transfer of money, since part of the sale price is paid in the form of a gift. However, you will need to check with the financial institution to see if this method is accepted.

You could also be a co-borrower and therefore a co-owner of the residence with your child, which would mean being jointly liable for the debt, but also paying municipal and school taxes on the property, not to mention the potential tax implications for you when the property is sold.

The concept of fairness should prevail in a gift or loan situation. Ask yourself: what would be fair for all my children?

There are several ways to equalize a gift, for example by giving an equivalent amount to the other children. You will then have to determine whether this gift should be made during your lifetime or upon your death.

• If the gift is upon death, a legacy by particular title of an equal amount could be included in the will for each of the children.
• You could also take out life insurance for an equivalent amount, with your other children as the beneficiaries.
• In the interest of fairness, you could require the loan amount to be repaid to your estate upon your death, thereby transferring the claim to your heirs.
• If you prefer to cancel the debt upon your death, you will have to choose one of the above-mentioned methods to equalize the gift or loan.