Parents send money for a down payment. Years later, the marriage ends, and everyone remembers the transaction differently. Was it a gift to their child? A loan that has to be repaid? Or did the parents keep an ownership interest in the property itself? A February 2026 decision from the Court of Appeal for Ontario answers that question more clearly than any case in years.
This scenario is one of the most common sources of litigation we see in separations, and it's especially common in bilingual and immigrant families, where a large family contribution toward a home is completely ordinary and rarely gets written down.
The starting point: a presumption, not an answer
Canadian law has a default rule for gratuitous transfers between family members, set out by the Supreme Court of Canada in Pecore v. Pecore, 2007 SCC 17. When a parent transfers money or property to an adult child without payment in return, the law presumes the child holds it in trust for the parent, not as a gift. This is called the presumption of resulting trust, and it exists because the law is skeptical that a parent meant to permanently give away significant wealth without saying so.
That presumption can be rebutted with evidence that the parent actually intended a gift. But it is only a presumption, meaning it fills a gap when there's no better evidence available. It was never meant to override clear proof of what actually happened.
Lalli v. Lalli, 2026 ONCA 123: the presumption steps aside when real evidence exists
The dispute in Lalli v. Lalli involved parents who had transferred funds toward the purchase of a property held in the names of their son and daughter-in-law, among a broader dispute touching three properties within the family. At trial, the judge found there had been no gratuitous transfer at all, characterizing the payment instead as satisfying a debt the father already owed his son, and dismissed the parents' resulting trust claim.
The Court of Appeal for Ontario disagreed and allowed the appeal, declaring the parents entitled to a 50% interest in the property. The court sent the remaining questions, including whether the property should be sold and how to account for the parties' respective interests, back to the Superior Court to resolve.
In practice, this means the legal fight rarely turns on abstract presumptions. It turns on whatever documents, communications, and conduct exist from the time the money actually changed hands.
The other side of the coin: Balkisson v. Sandy
A companion example from the same year shows how this plays out when the evidence points the other way. In Balkisson v. Sandy, 2025 ONSC 856, a mother had funded the purchase of a home registered in her son's name and later claimed he held it in trust for her. The court found the son had successfully rebutted the presumption of resulting trust, relying on evidence including a handwritten will and text messages that supported his position that the transfer was a genuine gift. The application was dismissed.
Read together, these two 2026-adjacent decisions make the same point from opposite directions: the presumption is a tiebreaker of last resort, and the real evidence in the file is what decides the case.
Why this matters on separation, not just on paper
How a family contribution gets characterized has real consequences once a marriage breaks down:
| Characterization | Effect on separation |
|---|---|
| Gift to one spouse only | Increases that spouse's net worth for equalization purposes, though a gift received during the marriage and properly traced may be excluded under the Family Law Act |
| Gift to both spouses | Generally treated as a joint asset, shared like any other property acquired during the marriage |
| Loan | Functions as a debt reducing net family property, but only if the loan can actually be proven to exist |
| Resulting trust in favour of the parents | Gives the parents a direct claim to the property itself, entirely separate from the equalization process between the spouses |
The stakes are highest for the resulting trust scenario: if parents can show they never intended to give up their interest, they may be able to recover their share of a property before the spouses ever get to dividing what's left.
What this means if your family helped fund a home
The single most useful thing you can take from Lalli is that intention has to be documented at the time, not reconstructed years later once a relationship has already ended. Courts weigh:
- Contemporaneous documents: a promissory note, a loan agreement, an email, a card, or a text message sent around the time the money moved;
- Whether repayment was ever discussed, scheduled, or actually made;
- How the transaction was described to others, on tax filings, or in a will;
- Whether the funds went to one spouse only or to both.
A verbal family understanding, however genuine, tends to carry little weight once it's being reconstructed for the first time in an affidavit after the relationship has broken down. If your parents are helping you buy a home, or if you're the parent doing the helping, put the intention in writing before the money moves. A short loan agreement, or a simple letter confirming a gift is to one child alone, costs far less than the litigation that follows when nobody wrote anything down.
Frequently asked questions
If my parents gave me money for a down payment, do I have to share it with my spouse if we separate?
It depends on what your parents actually intended, and on the paper trail supporting that intention. If it was a genuine gift to you alone, it may still count in your net family property calculation, though a gift received during the marriage can sometimes be excluded under the Family Law Act if it wasn't co-mingled and can be properly traced. If it was a loan, it functions as a debt reducing your net family property, provided you can prove the loan existed. If your parents retained a beneficial interest through a resulting trust, they may hold a claim to the property itself, separate from the equalization process entirely.
What is the presumption of resulting trust?
When a parent gratuitously transfers money or property to an adult child, Canadian law presumes the child holds it in trust for the parent rather than receiving it as a gift, unless the child proves otherwise. This comes from Pecore v. Pecore, 2007 SCC 17. The Court of Appeal for Ontario clarified in Lalli v. Lalli, 2026 ONCA 123, that this presumption is only a fallback: where there is real evidence of what the parent actually intended, that evidence controls, and the presumption becomes unnecessary.
How do courts decide whether family money was a loan, a gift, or a trust?
Courts look at the actual evidence of intention at the time the money changed hands: contemporaneous documents, text messages, emails, whether repayment was ever discussed or made, how the parties described the transaction to others, and how it was treated on tax returns or in wills. A verbal family understanding, recalled years later after a relationship has broken down, tends to carry little weight without supporting documentation from the time.
What should parents do if they're helping a child with a down payment?
Put the intention in writing before the money is transferred. A loan should be documented with a promissory note or loan agreement, ideally registered against title. A gift intended only for one child, not their spouse, should be documented as such at the time. Waiting until a relationship has already broken down to characterize an old transfer is far weaker evidence than a contemporaneous document.
What to do if this applies to you
If you're separating and a family contribution toward property is now in dispute, gather whatever documentation exists from the time of the transfer, however informal. If you're the one making a contribution now, don't rely on family understanding alone. A short, properly drafted document at the time the money moves is worth far more than the strongest recollection years later.
Enter each spouse's assets and debts at the date of marriage and the valuation date for a preliminary estimate of net family property and the equalization payment. The result is an estimate only.
Use the Property Division Calculator →This article provides general information about Ontario law as of the date of publication and is not legal advice. It does not create a solicitor-client relationship. Please consult a lawyer about your specific circumstances.
