Are Gifts from Parents Excluded from Family Property in British Columbia?

Buying a home is expensive, particularly in Metro Vancouver. As a result, many couples rely on financial assistance from their parents to enter the housing market. When the relationship ends, however, disputes may arise over whether the parents intended the money as a gift, a loan, an investment, or financial support for the family.

The British Columbia Court of Appeal’s decision in Xu v. Li, 2025 BCCA 327, illustrates the importance of clearly documenting parental contributions as well as advancing all available property claims at trial.

The Background

Ms. Li and Mr. Xu met in 2013 and married in 2014. During the marriage, Mr. Xu purchased an apartment in Burnaby, known as the Arcola Apartment, and a residence in Richmond, known as the Peterson Drive Residence. He registered both properties in his name alone.

The parties separated in January 2019. In the family law proceeding that followed, they disputed whether the properties formed part of the family property and whether Mr. Xu could exclude the funds his parents contributed from division.

What Is Excluded Property?

Under section 81 of the Family Law Act spouses generally share family property equally when they separate. Section 84 defines family property broadly and includes property owned by either spouse at separation, regardless of whose name appears on title.

Section 85 excludes certain property from division. This can include:

property owned before the relationship;
inheritances;
gifts from third parties;
some settlements and insurance proceeds; and
property derived from excluded property.

The spouse claiming the exclusion must prove the property is excluded property (section 85(2)).

Even if the original value remains excluded, section 84(2)(g) generally treats any increase in value during the relationship as family property.

For example, if a parent gives one spouse $300,000 for a down payment, that spouse may claim the $300,000 as excluded property. The spouse must show that the parent intended to give the money to that spouse alone and must trace the money into the home.

The result may differ if the parents intended the money as a gift to both spouses, a loan, an investment, or funds used to buy property for the parents’ benefit.

In Xu v. Li, the court had to decide whether Mr. Xu’s parents gave him the money personally, supported the family, or funded property that he held for them.

The Arcola Apartment

Mr. Xu argued that the money used to purchase the Arcola Apartment, and to pay its mortgage and expenses, had been gifted to him by his mother.

Because a gift from a third party to one spouse may qualify as excluded property, Mr. Xu had the burden of proving that his mother intended to make the gift to him personally.

The trial judge was not satisfied that the funds had been gifted exclusively to Mr. Xu. The judge also found that, even if Mr. Xu had initially received the money as a personal gift, he later gifted it to the marriage.

As a result, the proceeds from the Arcola Apartment were treated as family property.

The Peterson Drive Residence

Mr. Xu took a different position concerning the Peterson Drive Residence.

Rather than claiming that the money used to purchase the property was an excluded gift, he argued that the entire residence belonged beneficially to his parents. Although the property was registered in his name, he claimed that he held it in trust for them.

Mr. Xu maintained that his parents had provided the purchase funds and ongoing financial support because the residence was intended to be their home when they immigrated to Canada.

However, the evidence showed that Mr. Xu and Ms. Li had looked at properties together and moved into the Peterson Drive Residence with their child. Wire transfer records from Mr. Xu’s mother described the payments as “Family Support.” The court found that the residence had been purchased as a family home rather than solely for the benefit of Mr. Xu’s parents. The property was therefore family property.

A Gift and a Trust Are Different Claims

After the trial decision, Mr. Xu retained new counsel and attempted to reopen the trial. He sought to argue that, even if the Peterson Drive Residence was not held in trust for his parents, the money they contributed had been gifted to him and should be excluded from division.

The trial judge refused to reopen the case, and the Court of Appeal upheld that decision. At trial, Mr. Xu argued that his parents owned the property. He did not argue that they had given him the purchase funds as a personal gift.

Proving That Parental Funds Are Excluded Property

A spouse who claims that parental funds qualify as excluded property should prove what the parents intended and trace the money into the asset. Useful evidence may include bank and wire transfer records, gift letters, loan agreements, correspondence, purchase documents, and records showing whether anyone expected repayment.

The wording used in the transfer records may also matter. In Xu v. Li, the wire transfers described the payments as “Family Support,” which weakened Mr. Xu’s claim that his mother intended the money for him alone.

Families should record the purpose of any substantial contribution when they transfer the money. Clear records can prevent costly disputes later.

Unequal Division Requires Significant Unfairness

Mr. Xu also argued that the Peterson Drive Residence should be divided unequally because his parents had provided much of the purchase money.

Section 95 of the Family Law Act allows a court to divide family property unequally where equal division would be significantly unfair.

This is a demanding test. Different financial contributions during a relationship are generally not enough by themselves. Spouses often contribute to a marriage in different ways, including through employment, childcare, education, homemaking, and support of the other spouse.

The trial judge noted that Ms. Li had been a student and later a new mother. Her lower direct financial contribution to the properties was therefore understandable and did not justify unequal division.

The Court of Appeal found no error in the conclusion that equal division was not significantly unfair.

Before Parents Help Buy the Home

Parental contributions do not automatically qualify as excluded property. The parents should clearly record whether they intend the money as a gift to one spouse, a gift to the couple, a loan, or an investment. The spouses should also keep records tracing the money into the property.

Xu v. Li confirms that the spouse claiming an exclusion must prove the nature and purpose of the transaction. It also confirms that unequal division requires significant unfairness, not simply a larger financial contribution from one spouse or that spouse’s family. Anyone receiving substantial family assistance should document the arrangement and obtain legal advice before the transfer.