Generally, once parents have given their child(ren) funds for a downpayment as a gift, the parents cannot recover the gifted money. In fact, to recover the downpayment given as a gift, parents must prove the payment was made without intention to make a gift, or under circumstances such as fraud. Absent such circumstances, courts view gifted downpayments as completed, non-recoverable gifts, leaving the parents without legal recourse.
Gifts
Generally, gifted downpayments are allowed and accepted by mortgage lenders for all or part of the downpayment on a property. California law defines “gift” as a voluntary transfer of personal property made without consideration. (Civ. Code § 1146.)
To give a valid gift, California law requires the presence of several elements including (1) competency of the donor to contract, (2) voluntary intent to make a gift, (3) delivery, either symbolic or actual, (4) acceptance, either actual or imputed, (5) complete release of control by the donor, and (6) lack of consideration. (Bank of America N.T. & S.A. v. Cottrell (1962) 201 Cal.App.2d 361, 363 citing Connelly v. Bank of America (1956) 138 Cal.App.2d 303, 307.) If the donor or gift recipient fail to satisfy any of these elements, the gift may be incomplete or invalid. (see Turnbull v. Thomsen (1959) 171 Cal.App.2d 779, 783.) If the gift is incomplete or invalid, parents may recover the gifted funds; however, this form of automatic recovery is rare.
Intent and Evidence of a Gift
The donor’s intent is the most critical factor in determining whether a gift is complete. Delivery of a gift must be accompanied by a clear intent to relinquish control and dominion over the property. (Turnbull v. Thomsen, 171 Cal.App.2d 779, 783.) For instance, when a donor makes a gift, in their lifetime, but continues to exercise dominion and control over the gifted property, the gift is unexecuted and unenforceable. Here, the purported gift is an unenforceable promise to make a future gift. (Blonde v. Jenkins’ Estate (1955) 131 Cal.App.2d 682, 686.) As such, to make a valid gift, in their lifetime, a donor must completely release their power to revoke the gift. (Id.)
Likewise, when parents gift their child(ren) funds to use as a downpayment, they must intend to make a gift. Here, the court may determine the downpayment funds were a gift based on the donor’s express statement that the donor has no expectation of the funds being repaid. (In re Marriage of Lee and Du (Cal. Ct. App., Aug. 31, 2011, No. D058355) 2011 WL 3843935.) In sum, courts classify the transfer of funds as a gift in circumstances where a donor expressly states their intention to make a gift, places no conditions on the transfer of funds, and subsequently makes no effort to recover the gifted funds. (Id.)
Gift Letters
A gift letter is a letter, written by the donor, which expressly states the donor’s intention to make a gift. Typically, to ensure the necessary elements are present to constitute a gift, mortgage lenders require Gift Letters to accompany the mortgage application to ensure the funds given to the applicant are a gift, and not a loan. (Saldana v. Saldana (Cal. Ct. App., Apr. 11, 2023, No. A163556) 2023 WL 2887541, review denied (June 28, 2023).)
The court’s determination of whether a transfer of funds is a gift is based on all available evidence; a burden often facilitated by the existence of a gift letter. (Burkle v. Burkle (2006) 141 Cal.App.4th 1029, 1036; Matson v. Jones (1969) 272 Cal.App.2d 826, 829.) Gift letters must include the donor’s name, address, the gift’s amount, the donor’s relationship to the gift recipient, and a statement that the donor does not expect repayment, to facilitate the court’s determination. (In re Marriage of Broady (Cal. Ct. App., July 23, 2025, No. D083961) 2025 WL 2057397, review filed (Sept. 4, 2025).) When executed correctly the gift letter will demonstrate that the donor executed the gift and letter, freely, voluntarily, and knowingly. (Id.)
Revocability of a Gifted Downpayment
As a rule, gifts are generally irrevocable upon delivery and acceptance unless specific circumstances warrant an exception. Thus, gifts made during the donor’s lifetime cannot be revoked unless the gift is procured through improper means, such as fraud or misrepresentation. (Murdock v. Murdock (1920) 49 Cal.App. 775, 781.)
Accordingly, when parents gift a downpayment and execute a gift letter stating their lack of expectation for repayment, the downpayment is presumptively an irrevocable gift. Here, there is no legal obligation of repayment. So, even if the child(ren) feels a moral obligation to repay their parents for the downpayment funds, the moral obligation does not create a promise to pay, and the downpayment is a gift. (In re Marriage of Lin (Cal. Ct. App., July 30, 2014, No. A138349) 2014 WL 3736077.)
Parents may, however, revoke their gifted downpayment, even if they’ve executed a gift letter, if the gift is procured through fraud, or other improper means. For instance, a gifted downpayment may be revoked if the parent is mistaken about a basic fact, such as the circumstances surrounding the property’s purchase, or if the downpayment was procured through the child’s exertion of undue influence. (Earl v. Saks & Co. (1951) 36 Cal.2d 602, 609.)
However, where parents gift downpayments funds based on an oral promise, but the oral promise is neither reflected on the property’s title or in writing, parents cannot recover the funds if the child later claims the oral promise did not exist. Thus, absent a writing placing strict restrictions on the downpayment funds, or evidence clearly proving the funds are a loan, parents generally cannot recover a gifted downpayment.
What is an Example?
“Shawn” and “Julie,” an unmarried couple, decide to buy a house together. The house costs $300,000.00. Julie contributes the $60,000.00 downpayment from her savings, and Shawn’s parents provide an additional $40,000.00 to help with the remaining portion of the downpayment and closing costs, promising Shawn and Julie repayment was not expected. When Shawn and Julie apply for a mortgage, the lender requires Shawn’s parents to execute a gift letter—Shawn and Julie both sign the letter acknowledging its terms.
Years later, Shawn and Julie’s relationship has deteriorated, so Julie files for partition. During the partition action, Shawn argues that Julie’s $60,000.00 contribution to the downpayment should be repaid to her before the remaining sale proceeds are split between them. In turn, Julie argues that the $40,000.00 must be included in the initial calculation, because Shawn’s parents intended to make a gift.
Ultimately, the court finds that the $40,000.00 gift from Shawn’s parents was a true gift based on the signed gift letter which expressly states Shawn’s parents’ lack of repayment expectation. Because Julie’s $60,000.00 contribution was her own separate investment, the court credits Julie that amount before the remaining proceeds are divided. Meanwhile, the $40,000.00 gift is treated as a contribution to Shawn’s share.
Conclusion
California law deems gifted downpayments nonrefundable gifts. Absent clear and convincing evidence of a contrary intention, parents cannot recover the gifted funds. In partition actions, this distinction is crucial in the accounting phase, where certain interests may be reimbursed from the property’s sale proceeds. At Underwood Law, our partition attorneys can help you navigate your action efficiently and with care. We are here to help.
