Buyers Who Are Receiving A Gift To Help With The Down Payment
Gift letters are often required by mortgage companies when parents (or other close family relatives) are helping children buy a home. Mortgage companies want to see that the down payment either comes from the borrowers' own resources or has been gifted.
In a case decided very recently, a father had made a gift of $83,500.00 on the purchase of property by his son and daughter in-law. Later, the son and daughter in-law divorced.
In the legal action to divide the matrimonial property, the father said that the gift was intended solely as a gift to his son. Alternatively, he told the Court that it should be treated as a loan. Otherwise, the wife stood to receive $41,750.00, one half of the gift, on dissolution of the marriage.
In this case the Alberta Court of Queen's Bench agreed with the wife. They treated the $83,500.00 down payment from the husband's father as a gift to both the husband and wife and therefore the wife got her $41,750.00. But the Court decision leaves it open to specify that a gift is to one child only.
So your clients may want to be very precise when they do a gift letter, and may want to keep a copy for future use!
2013.April.30, George Harstgrove of Mortgage Alliance