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What are Child Trust Funds and what are the issues for families with disabled children?
The UK Government introduced Child Trust Funds (CTFs) in 2005 as long-term tax-free savings accounts for children with the aim of ensuring that every child has savings at the age of 18. Parents cannot apply for a new Child Trust Fund now because the scheme is closed, but they can apply for a Junior ISA for their child instead.
If a Child Trust Fund is already in place, funds can continue to be added to the CTF account up to £4,080 a year . The year starts on the child’s birthday and ends the day before their next birthday.
The key point is that the money belongs to the child and they can only take it out when they are 18, but they can take control of the account when they reach 16 and in the meantime it is controlled (but not owned) by the parents.
The problem arises in the case of disabled and vulnerable young people, who may not have the mental capacity to access and manage their funds once they reach 18.
A recent survey showed that 87% of families believe their disabled child will not be able to access money held within their Child Trust Fund (or Junior ISA) once they reach 18.
Ironically, parents were actually given extra vouchers for the CTF when they were first introduced due to the very fact that their child was disabled.
So the situation for these families when the child reaches 18 will be as follows:
1. The parents cannot touch the money because it belongs to the child
2. The child will not have capacity to access the money themselves
3. The child will be assessed as owning the money for means-tested benefits purposes anyway even though it cannot be spent, which may adversely affect their entitlements
What are the options?
Families with disabled children, who are already dealing with challenging situations, will need to apply to the Court of Protection to be appointed as the child’s Deputy, so that they have the necessary authority to access the accounts.
This application process can be costly (with the court fee alone set at £400 – a sum which may exceed the entire amount held in the Child Trust Fund). However, if a Deputy is going to be required anyway to deal with other aspects of the child’s finances once they reach adulthood, then the costs become more proportionate.