Giving Wisely: How to Gift a Down Payment and Safeguard Your Generosity

Gifting a down payment to help your child enter the housing market is a generous act. But without proper planning, this well-meaning gesture could lead to unintended financial headaches—especially if life throws a curveball, like a relationship breakdown. Protecting your gift requires thoughtful precautions to ensure it’s used as intended and safeguarded for the future.

Start with Solid Documentation

A gift letter is essential. This simple document confirms that the funds are a gift, not a loan, and meets lender requirements. It should clearly state the amount, your relationship to the recipient, and a declaration that repayment isn’t expected. A little paperwork now can prevent major issues later. Some of our lenders want to know more - they may ask for a bank statement from the giftor, they may ask the age, job, and salary of the person gifting you funds. This is all part of the AML requirements our lenders have, so if you are gifting or getting a gift, be prepared to share more than just the amount of the gift with your mortgage broker and bank.

Preparing for the "What-Ifs"

No one wants to think about a breakup, but it's a reality worth considering. A cohabitation or prenuptial agreement can ensure your gift stays with your child—not their partner—in the event of a separation. These discussions should be open, honest, and focused on protection rather than mistrust. This is a really important step if you are getting a massive gift and the other party you are buying with is not able to equally match the contribution. - I think of the gift often times as a clients early inheritance - so you will want to protect this and speak with a family lawyer.

For Larger Gifts: Trusts as a High-Level Option

If you’re gifting a significant amount or are part of a high-net-worth family, consider using a trust. While this option requires legal guidance, it allows for greater control over how and when the gift is used, ensuring it remains aligned with your intentions. This can be complicated so please leverage an accountant and or lawyer for this step.

Know the Tax Terrain

While Canada does not have a gift tax, some property transfers—like those involving real estate—may have tax implications. Consulting a tax advisor or lawyer can help you navigate potential pitfalls and ensure a smooth financial transition.

Helping your child achieve homeownership is one of the most meaningful ways to support them. By focusing on proper documentation, proactive agreements, and expert guidance, you can ensure your gift creates opportunities without unintended consequences.

Because when it comes to real estate, it’s not just about giving—it’s about giving wisely.

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