ARTICLE
25 September 2025

Navigating The Changing Landscape Of Gift Exclusions In Family Law

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Lerners LLP

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Lerners LLP is one of Southwestern Ontario’s largest law firms with offices in London, Toronto, Waterloo Region, and Strathroy. Ours is a history of over 90 years of successful client service and representation. Today we are more than 140 exceptionally skilled lawyers with abundant experience in litigation and dispute resolution(including class actions, appeals, and arbitration/mediation,) corporate/commercial law, health law, insurance law, real estate, employment law, personal injury and family law.
Law360 Canada (September 23, 2025, 1:56 PM EDT) -- Giving gifts to family members has long been part of normal estate and financial planning. In Ontario — and in many other jurisdictions...
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Law360 Canada (September 23, 2025, 1:56 PM EDT) -- Giving gifts to family members has long been part of normal estate and financial planning. In Ontario — and in many other jurisdictions — parents often transfer money or assets, such as shares in a family business, to their children.

This is usually done with good intentions: helping their children get ahead financially, passing down a legacy or avoiding future family law complications. When done properly, these gifts can be excluded from a spouse's net family property if the marriage ends. But lately, courts are looking at these arrangements more closely, especially when they seem designed mainly to keep assets out of an equalization calculation.

This increased scrutiny reflects a concern that some families may be using the Family Law Act's exclusion provisions to disguise shared assets as gifts. Judges are more aware than ever that even a well-worded gift deed or trust document may not reflect what's really going on. Lawyers need to be extra cautious to ensure that any gift a client wants treated as excluded property truly represents a clear, independent transfer of ownership. Below, we'll look at why courts are taking a tougher approach and how to best advise clients who want to make or rely on a gift exclusion.

The usual practice — and why it's under pressure

Giving property or shares to children — either during one's lifetime or through an estate plan — can be a smart move. Parents might help their child buy a home or transfer shares in a family business. This can help reduce taxes or structure succession in a meaningful way. It can also, in theory, protect family wealth from division in the event of a marital split — if the gift qualifies for exclusion.

The problem arises when these kinds of gifts are made not out of generosity or in the interests of estate planning, but simply to block a spouse's legal claim to equalization. Courts are alert to this risk. A signed deed or trust document won't automatically convince a judge that the asset truly left the donor's control. Now, courts are more focused on the reality of the transfer, not just what's on paper.

Courts are looking more closely

To be recognized as a valid gift, a transfer must meet the classic three elements: donative intent, delivery and acceptance. Judges expect clearer proof of all three.

  • Donative intent should be obvious not just from the wording of documents but from the broader context.
  • Delivery needs to be meaningful — something like updated share records or bank transfers that show the asset really changed hands.
  • Acceptance, though sometimes implied, should ideally be backed up with a written acknowledgment or other evidence that the donee knew they were taking full ownership — not just holding it on paper for someone else's benefit.

In the family law context, the presumption of resulting trust still applies when there's a gratuitous transfer. This means the court will assume the asset wasn't actually gifted unless there's strong evidence to prove otherwise. A gift deed alone is rarely enough. The court wants to see the bigger picture: was the gift real or was it just a legal workaround?

This is especially true in cases involving family corporations. If a parent claims they transferred shares to a child to keep them out of net family property, but the company records or behaviour after the fact suggest continued joint involvement or retained control, courts will often reject the claim. Vague references to “tax planning” or “family tradition” won't cut it without proof that real control or benefit has shifted.

Best practices when advising on gifts

Given how carefully courts are now analyzing these transfers, here are a few key things lawyers should keep in mind:

1. Document everything properly

A boilerplate gift deed is no longer enough. Encourage clients to maintain full records, such as:

  • Signed letters or deeds explaining the reason for the gift
  • Corporate records or board minutes showing share transfers
  • Bank or investment statements if money was involved

The documentation should do more than just say the gift is “excluded” — it should tell the story of why the transfer happened and show that both parties understood it.

2. Push for full disclosure

Judges take issue with clients who claim exclusions while failing to disclose the full financial picture. Helping your clients understand that transparency — about corporate records, sources of funds and trust documents — is key. If someone later accuses them of making a sham or fraudulent transfer, clear records will help defend the gift.

3. Show that control actually changed

One red flag courts watch for is when the donor still acts as though they own the asset. If a parent gives their child control of a company but keeps signing cheques, making decisions or running things, a judge may conclude the gift wasn't real. Make sure your clients understand that actual change in behaviour — and real ownership — are essential.

4. Support the story with third-party evidence

Whenever possible, back up your client's position with outside evidence. Accountants, bank officials or financial advisers can provide useful letters or records that confirm what was discussed, what was signed and how control or ownership changed. Courts trust this kind of corroboration far more than vague testimony.

5. Avoid ‘last-minute' gifts

Judges can tell when a gift was hurriedly arranged after a separation begins, making it look more like litigation strategy than estate planning. Ideally, gifts should be made as part of a long-term plan and well before any marital trouble. A documented succession or estate plan that predates the breakdown carries more credibility.

Final thoughts

Gifts between family members are still a valid and useful tool for succession and estate planning. And the law still allows certain gifts to be excluded from a spouse's net family property. But with courts paying closer attention to the details, clients and their lawyers need to be especially thorough. Proper records, clear intentions and follow-through are more important than ever.

For practitioners, the takeaway is this: an exclusion claim is only as strong as the evidence behind it. The best advice is to help clients plan and execute real gifts — supported by documentation and changes in behaviour that back it up. Executed properly, these steps can provide solid protection. Courts are willing to uphold valid gifts — but only when they're confident the gift is exactly what it claims to be.

Originally published by Law360.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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