AMLC Legal Insights - Gift Letters: When is a “Gift” Not Really a Gift?

By Alex Mok

High housing prices and strained household budgets mean that many younger purchasers cannot buy a home without assistance from their parents. To satisfy a lender, the contributing family member may sign a gift letter confirming that the money advanced for the purchase is a genuine gift and that no repayment is expected.

But is the money truly a gift as between the family members themselves? The recent decision in Kirkwood Estate v. Whitefield, 2026 BCSC 1265, suggests that the answer may depend on the surrounding circumstances, not merely on the label used in a document prepared for mortgage financing.

What is a gift letter?

In the mortgage context, the lender will want to confirm that any contribution from a family member of the borrower is not a loan that could affect the borrower’s ability to repay the mortgage. The lender will also want to ensure that the contributing family member will not assert a beneficial interest in the property and compete with the lender in a foreclosure or bankruptcy.

To address these concerns, the lender will usually require the contributing family member to provide a gift letter. A gift letter will typically identify the transferor and recipient, state the amount being advanced, confirm that the funds are being provided as a genuine gift, and expressly say that the recipient is not required or expected to repay the money.

What happened in Kirkwood Estate?

In Kirkwood Estate, a mother advanced funds to help her son purchase a property. She also signed a gift letter stating that the advance was a genuine gift, which assisted her son in obtaining mortgage financing. She later made additional contributions by helping with some of the mortgage payments.

After the son and his ex-spouse separated, the property was sold. The mother’s estate, supported by the son, claimed an entitlement to a share of the sale proceeds corresponding to the mother’s financial contributions to the property. The ex-spouse opposed the claim, relying primarily on the gift letter as evidence that the mother had intended to make a gift. The court found in favour of the estate and held that it was entitled to a proportionate interest in the equity of the property.

The presumption of resulting trust

The general rule is that when a person transfers property or money to another person without receiving consideration, the recipient is presumed to hold that property or money on resulting trust for the transferor. The recipient has the burden to rebut that presumption by adducing evidence and proving that the transferor intended to make a gift.

While a gift letter may appear to show the transferor’s intention to make a gift to the recipient, that is not conclusive evidence of a gift. Equity looks to substance rather than form — the court will consider the context in which the gift letter was prepared and how it fits with the evidence as a whole.

As noted above, a gift letter serves an important but narrow function: it is directed at addressing the lender’s concerns in mortgage financing. In other words, a gift letter does not necessarily determine the private legal relationship between the transferor and recipient.

Clarity matters

Family members often do not carefully document their financial arrangements. Yet ambiguity can be costly. If an advance is not intended as an outright gift, then both the transferor and the recipient should clearly define the nature of the advance at the outset. Is it a loan, giving rise to merely a right of repayment? Or is it intended to give the transferor a beneficial interest in the property itself? Clear documentation at the outset is not only prudent — it is good practice.

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AMLC Legal Insights are intended for informational purposes only and do not constitute legal advice or opinion.