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A Child Trust Fund is a tax-free, long-term savings account for children born between 01 September 2002 and 02 January 2011. The scheme closed in January 2011 although the accounts still remain and money can still be added to the accounts (up to the limit of £9000 per year) until you child reaches the age of 18. Your child cannot access the money until they are 18 but can take control of the account when they reach the age of 16.
Until your child takes control of their account, the main contact is called the ‘registered contact’ which is often their parent or guardian. The registered contact has certain responsibilities and is the only person who can:
Once your child reaches the age of 16, they can take over the account by contacting the Child Trust Fund provider or leave the registered contact in charge of the account. When your child reaches the age of 18, the Child Trust Fund matures. At this point your child automatically takes over the account and no more money can be added. Your child can either take out the money or transfer the money to an adult ISA. Once the money is taken out of the Child Trust Fund or transferred, the account will close. Until that happens, the money stays in an account that no-one else has access to.
In most circumstances, this poses no problems and the adult child enjoys tax-free money they can spend or save as they wish; a welcome prospect for most 18 year olds. However, there are some circumstances where an adult child cannot make decisions in relation to their finances because they lack the mental capacity. This results in neither the child or their parents having access to the account. Analysis by BBC News suggests about 4ooo of the 80000 people who are in this situation are eligible for universal credit, but will receive lower payments because they have more than £6,000 in their accounts. Where no-one has access to the account, the only option is to apply to the Court of Protection to become the adult child’s deputy to manage their financial affairs. This has become a contentious issue because it can be a time-consuming, costly process for what might be a relatively small amount of money. However, deputyship orders (as well as Lasting Powers of Attorney) provide vital safeguard to protect vulnerable people from fraud or abuse. Once a deputyship order has been granted, it can be used to help manage all financial matters relating to the person, including any property or assets they inherit.
You can make an application to the Court of Protection for a property and financial affairs deputyship order when your child is under the age of 18, if you believe your child will lack capacity to make decisions for themselves when they turn 18. This will ensure that you have the proper legal authority to make financial decisions for them when they reach adulthood. There are 4 steps you have to take to make an application which can be done online or using paper forms:
You can complete the application yourself, although some people instruct a specialist Court of Protection Solicitor to ensure there are no errors in their application.
The fee (payable upon application) for a financial deputyship order is currently £371 per application. However, on 01 December 2020 the Government announced that parents or guardians of children who lack mental capacity can ask for court fees to be waived when seeking access to a Child Trust Fund. They anticipate that the, “vast majority of affected families will not have to pay fees.” Parents and guardians who apply to the Court of Protection before their child’s 18th birthday already do not pay fees, unless the child has other substantial assets, and those who have already paid can request a refund.
Families are encouraged to make an application before their child’s 18th birthday. If a property and affairs application is made to the Court of Protection before their 18th birthday, the balance in the Child Trust Fund does not count as capital. This means they can apply for a remission under the Help with Fees scheme and do not have to pay fees unless they have any other asset worth over £3,000 or income, not including certain benefits, over £1,085 a month. Further details and the online application can be found on the Government’s website.
Part of a deputy application is obtaining a mental capacity assessment, sometimes referred to as a COP3 because that is the reference number of the form used to report whether your child lacks the mental capacity to make decisions in relation to their financial affairs. Whilst we ensure that our COP3 reports are promptly completed (within 7 days), it may take longer if you are requesting one from your G.P. or Social Services. So it is important that you request a COP3 report within plenty of time to make your application to the Court of Protection.
We are mindful that this is a challenging situation for many parents who aren’t familiar with the application process and, “just want their child to have access to their funds as easily as a non-disabled child would”. That is why we have decided to lower of COP3 report fees. If you require a COP3 report for this purpose, we can provide one in 7 days for the reduced fee of £375. This is a fixed fee and includes VAT, visiting you and your child and writing our report. We never charge travel expenses and cover England and Wales.
In 2023, the Government consulted on whether a small payments scheme should be established. The scheme would have, amongst other things, enabled parents to access up to £2500 from their child’s account without the need to apply to become their deputy. However, the scheme never made it into existence and the Government decided that focusing on the deputyship application process to make it easier to complete and raising awareness of the Mental Capacity Act would address the root cause of the problem. On 09 June 2023, the Ministry of Justice published a toolkit to help parents who need to make an application to the Court of Protection. The toolkit can be found here.
It is possible that the young person lacks mental capacity in relation to their property and financial affairs, but has the mental capacity to appoint an attorney to manage them on their behalf. A Lasting Power of Attorney (LPA) is a legal document that enables the young person (the donor) to appoint one or more attorneys to help them make decisions or make decisions on their behalf in a similar way to how a deputy will make financial decisions. This isn’t an alternative to a deputyship order in the sense that it is a choice. If a young person has the mental capacity to appoint an attorney and create a LPA, a deputyship order is not the right tool to use, it’s one or the other.
You can find out more about LPAs on the Government website.
If you have any questions about this, please don’t hesitate to contact us. You can either email hello@simplysocialwork.co.uk or WhatsApp us on 07441 443895.
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