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Child Trust Fund and people who lack Mental Capacity

Reasons to choose Wilson Browne

Thousands of children turning 18 after 1 September 2020 are set to enjoy a windfall when they become entitled to a pot of cash called a Child Trust Fund (CTF).

CTFs are tax-free savings accounts that were available for children born between 1st September 2002 and 2nd January 2011. The scheme was launched in 2005 and parents initially received a voucher from the Government for £250 (or £500 for parents on low incomes). For children born between 1 September 2002 and 31st July 2003 this was topped up by another £250 or £500 on their 7th birthday. Once the account was open, parents were allowed to top up the account (the current limit is £9,000 per year). The Government contribution was scrapped in 2010, and shortly after, CTFs were replaced by junior ISAs.

The scheme was, nonetheless, huge and there is estimated to be £9billion held in CTFs. The amount that each individual will receive will vary depending on how much the Government paid and whether their parents topped it up. For some, who received the lowest contribution the funds may be worth less than £100, but for others where families deposited additional savings, they could be sitting on a nest egg of thousands.

For most teenagers receiving their windfall, the decision will be what to do with the money. The money legally becomes theirs on their 18th birthday, so they can choose whether to spend it, continue to save, or use it to help pay for university.

What if the young person does not have mental capacity to manage their account?

A significant number of CTF account holders will find themselves locked out of their accounts, because they lack the mental capacity to manage their own money. In some cases these people will have received extra vouchers from the Government of £100 or £200 per year, if they were in receipt of Disability Living Allowance.

If the account holder lacks the mental capacity to manage their own finances, their parents will not be able to manage the account when the child turns 18, as they legally become an adult and the money belongs to them. The amount of money the young adult receives could affect their entitlement to means tested Benefits, as they will be treated as owning the money, even if they cannot access it.

In order to access the money, it will be necessary to apply to the Court of Protection to appoint someone to manage the account. The Court of Protection is a specialist court that makes decisions on behalf of people who lack capacity to decide things for themselves. In many cases, it will be necessary to apply to appoint a property and affairs deputy. A deputy is someone, usually a family member, who is appointed by the court to manage and make day-to-day decision about someone’s finances. Depending on the amount of money in the CTF account, the court could make a single order for a parent or trusted person to have access to the CTF account.

Applying to the Court of Protection can be expensive, as there is a court fee of £365, and if a solicitor is used, there could be legal costs,. If the amount in the CTF is less than £3,000, (Nationwide – one of the biggest providers of CTFs – estimates that the average balance on its accounts is £2,311) then the court will reduce the fee or not charge it at all. Additionally, the court deals with most property and affairs applications on the papers, so this would reduce legal costs.

Understandably there has been criticism that the CTF scheme was not thought out and did not take account of the position of children without mental capacity, particularly those with lifelong learning disabilities. Much of the criticism has highlighted the expense and difficulty involved in applying to the Court of Protection.

In reality, the situation with CTFs is nothing new. For many years, parents of learning disabled children have put aside money to save for the future, only to find that on turning 18 the legal status of a child and their parent changes, and they can no longer control the account. The Court of Protection is well versed in dealing with such applications. What has changed with the CTF windfalls is that, exactly as the Government intended, many more children will begin their adult life with a pot of savings.

How can we help?

At Wilson Browne we can help you access the locked accounts, so the young person can enjoy the benefit of their money. We have a dedicated team that specialises in making Court of Protection applications.

Our Court of Protection team can offer the following:

• Free initial consultation;
• Legal 500 recognised Court of Protection experts;
• Transparent fees – for most applications to access a CTF account, we would not expect to charge more than the court’s fixed fee, and would only charge a fee that is proportionate to the amount of money involved;
• Appointed by the Court of Protection to make speedier online court applications.

If you are a parent, or are looking after a child who may be locked out of their CTF account, then please get in touch for a no obligation free initial discussion today.

James Batey


James Batey

Associate Legal Practitioner

James is a law graduate and member of the Court of Protection team with more than 25 years experience of practicing in the Court of Protection.