A gifted deposit declaration may not tell the whole story
It is increasingly common for parents to help their adult children onto the property ladder by contributing towards a house deposit, paying for renovations or providing financial assistance towards a family home. But what happens when the couple later separates or divorces? Does the parent automatically lose their money if they signed a declaration confirming that their contribution was a gift?
A recent family court decision, WM v W and H (TOLATA: Parental contribution and Gifted Deposit Declaration) [2026] EWFC 317 (B), highlights an important issue in divorce and financial remedy proceedings: who actually owns the former matrimonial home, and what happens when a parent claims to have a beneficial interest in it?
When a gift may not really be a gift
In this case, the wife’s mother (WM) contributed £200,000 towards the deposit for the former matrimonial home. She also spent a further £90,505 refurbishing a lodge in the property’s grounds, which she intended to occupy.
WM and her daughter (W) said that they had agreed WM would own the lodge if it could be separately registered at HM Land Registry. If that was not possible, she would instead have a one-third beneficial interest in the main property.
However, the property was registered in the husband’s (H) and W’s names alone. WM had also signed a gifted deposit declaration (GDD), required by the mortgage lender, confirming that her contribution was a gift.
When the marriage broke down, the property was sold, producing net proceeds of £734,516. During the financial remedy proceedings, H argued that WM’s contribution had been an outright gift and that she had no entitlement to the sale proceeds.
WM intervened in the proceedings to establish her own interest in the property, arguing that the money had never been intended as a gift and that she had a genuine beneficial interest in the family home.
What did the court decide?
The court found in WM’s favour and declared that she was entitled to a one-third beneficial interest in the former matrimonial home.
Importantly, the judge considered that the gifted deposit declaration was a document provided to the mortgage lender to satisfy its lending requirements. It was not necessarily an agreement between the family members about who beneficially owned the property.
The court considered all the circumstances, including the discussions and understanding between the family members, the financial contributions made and their conduct. There was evidence of a common intention that WM would have an interest in the property, together with a financial contribution and resulting detriment on her part.
The judge also considered a Canadian decision, Kirkwood Estate v Whitefield [2026] BCSC 1265, which supported the distinction between a declaration given to a mortgage lender and the parties’ actual intentions as between themselves.
The decision is particularly interesting because there is no English authority directly determining the effect of a gifted deposit declaration on an alleged agreement or constructive trust of this kind.
Does this case mean parents can simply change their minds about a gifted deposit?
Not necessarily. The decision in WM v W and H (TOLATA: Parental contribution and Gifted Deposit Declaration) [2026] EWFC 317 (B) should not be interpreted as giving parents an automatic right to reclaim money they have previously gifted to their children.
Historically, the courts have been reluctant to accept attempts to retrospectively re-characterise an outright gift as a loan or an investment in a property, particularly where there is little contemporaneous evidence to support that assertion. Where a parent has contributed towards a property purchased in their child’s name, the presumption of advancement may also support the conclusion that the money was intended as a gift.
A signed gifted deposit declaration is therefore potentially very significant evidence of the parent’s intention at the time of purchase. In Thomas v Smalling [2020] EWHC 3186 (Ch), the court treated such a declaration as generally decisive where it reflected the parties’ actual agreement and the mortgage lender had relied upon it when agreeing to provide the mortgage.
However, WM v W and H demonstrates that the existence of a gifted deposit declaration does not necessarily bring the matter to an end. Where there is convincing evidence of a prior agreement that the parent would acquire a beneficial interest in the property, the court may look beyond the declaration and consider the parties’ actual intentions and the circumstances surrounding the transaction.
There is also an important distinction between a genuine change of position or subsequent disagreement about the arrangement and knowingly providing misleading information to a mortgage lender. A declaration which was knowingly untrue when signed could potentially raise serious issues, including mortgage fraud. This is why the arrangements must be properly understood and documented before money is transferred.
Why is WM v W and H (TOLATA: Parental contribution and Gifted Deposit Declaration) [2026] EWFC 317 (B) important in divorce and financial remedy proceedings?
This case highlights a significant issue that can arise when a couple divorces: the assets registered in the parties’ names may not necessarily belong to them beneficially in their entirety.
When the court considers how to divide a couple’s finances following divorce, it must first establish what assets are actually available. If a parent, relative or other third party has a genuine beneficial interest in the former matrimonial home, that interest cannot simply be treated as part of the couple’s matrimonial assets available for division.
In this case, WM’s successful claim meant that one-third of the net sale proceeds belonged to her, rather than being available to H and W as part of their financial settlement.
Third-party claims can therefore have a substantial impact on financial remedy proceedings, particularly where the former family home represents the parties’ most valuable asset.
They can also complicate negotiations and lead to additional court proceedings. A parent may need to intervene in the financial remedy case or bring a separate claim under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA), to establish their interest in the property.
This can affect:
- The value of the matrimonial assets: The court needs to identify what the parties actually own before determining how their finances should be divided.
- Housing needs: If a parent establishes an interest in the former family home, there may be less equity available to provide housing for the separating couple and their children.
- Financial settlement negotiations: A dispute about a parent’s contribution can delay settlement and make it more difficult to agree how the proceeds of sale should be divided.
- Litigation costs: Disputes involving third-party ownership claims can result in additional evidence, legal costs and potentially separate court proceedings.
It is also important to understand that the fact that a parent has contributed towards a property does not automatically mean they are entitled to a share. The court will examine the evidence and determine whether the contribution was genuinely intended as a gift, a loan or an investment giving rise to a beneficial interest.
How can you protect yourself?
If you are helping your child or another family member purchase a property, it is essential to be clear from the outset about whether your contribution is intended to be:
- An outright gift, with no expectation of repayment or ownership.
- A loan, which must be repaid in accordance with agreed terms.
- An investment giving you a beneficial share in the property.
Ideally, this should be recorded in a properly drafted written agreement or declaration of trust before the money is transferred. A gifted deposit declaration required by a mortgage lender should not be treated as a substitute for an agreement between family members.
Equally, if you are going through a divorce and your parent or another family member has contributed towards your home, you should establish at an early stage whether that contribution was genuinely a gift or whether they may have a beneficial interest.
How we can help
Financial remedy proceedings can become particularly complicated where parents or other family members have contributed towards the purchase or improvement of the former matrimonial home.
We advise clients on all aspects of financial remedy proceedings, including disputes about property ownership, third-party beneficial interests, gifted deposits and family loans. We can also advise parents who believe they have an interest in a property and need to protect their financial contribution when a couple separates.
Whether you are seeking to protect your own financial settlement or establish a parent’s interest in a property, obtaining specialist legal advice at an early stage can help avoid costly disputes and ensure that everyone’s interests are properly considered.
At Branch Austin McCormick, we are here to guide you through every step of the financial remedy process. Caroline Ford has extensive experience in this area and all aspects of family law. If you would like to speak with Caroline Ford please contact her directly at cf@branchaustinmccormick.com or 020 7851 0102 or 0759 759 1900 or alternatively, please do not hesitate to contact another member of our Family Law Team 020 7851 0100.
