For children born between 1 September 2002 and 2 January 2011, the government set up long-term tax-free savings account to deposit funds for most children born during this period.
The scheme has ended and so you cannot open a new child trust fund although money can still be paid into an existing account up to £9,000 a year. The money belongs solely to the child, not the parents or guardians and the child can take control of the account when they are 18 (although the child can elect to manage it themselves from the age of 16).
The Problem with Child Trust Funds
At first glance, the scheme looks great – the child gets some tax-free cash when they reach 18 to help them when they may need it as an adult. However, it does not account for the situation whereby a child may be entitled to the funds, but they live with a medical condition or disability which renders them unable to access the account or manage their money without support.
If this is the case and the child is unable to make a Lasting Power of Attorney through a mental impairment, then the trust fund cannot be accessed without a parent or guardian applying to the Court of Protection for a Deputyship Order to manage the money of the adult child who has now come of age. Concerns have been raised by parents with the government about the disproportionate cost and time of such an application and the relatively small amounts of money which can be claimed. Many families simply don't feel as though it is worth the aggravation.
Once a child reaches the age of 18 then legally, they are an adult. This means that they will need to manage their own money and if not, then a trusted individual such as a parent or guardian should manage their money for them. They may be in receipt of an income from benefits, wages, inheritance or in the case of disabled children, they may also be in receipt of a large financial settlement as a result of medical negligence. There is the common misconception that benefits paid to a parent as DWP appointee for their adult child or other sources of income intended for the child can be used by the parent. That is simply not the case - if the money is intended for the adult child, then it is their money and should be formally managed and held separately from the parent or guardian.
A Deputyship Order for financial affairs allows a parent, guardian or other individual to manage the adult child's money, access a Child Trust Fund, set up bank accounts, make payment of bills etc. This route protects the child from ensuring their money is kept separate from their parents' and allows the parent to maintain control over the funds by acting in their child's best interests.
Court Fee and Deputyship Fees
When applying for a Deputyship Order, there is a Court fee of £371 which is usually payable to the Court at the time of making the application. However, the government have stated that in certain cases the Court can waive the Court fee for making an application for Deputyship. If the Order is only required for access to a Child Trust Fund and the child does not have other assets worth £3,000 or income over £1,085 (excluding certain benefits) then the Court fee may be waived. We must caution however, that the issue of whether the Court fee will be waived is assessed on a case-by-case basis.
Once appointed, a Deputy will be responsible for paying an annual supervision fee and Deputy bond from the child's funds. In order to assist with the ongoing financial burden to their child, the Deputy can also apply for a reduction in these fees depending upon the circumstances of the individual about whom the Deputyship Order is made.
How can we help
We appreciate that accessing Child Trust Funds for families of disabled children especially, can be a particularly daunting thought and so at Giles Wilson, we seek to ensure that you are guided through the process of Deputyship in a straightforward and sensitive manner. We also offer a reduced fee for preparing the application for Deputyship when the sole purpose is to obtain a Deputyship Order to access a Child Trust Fund on your loved one's behalf.
If you have someone in your life you think would benefit from Deputyship or you wish to obtain further advice, then our Court of Protection Team would be happy to assist.