Child Trust Funds, the Mental Capacity Act & Deputyship

The CTFs were introduced in 2002 by the then Labour government as a way to boost saving rates and give all children a pot of money when they turned 18. The idea was that the government would get the ball rolling with savings and then loved ones could add to the CTF over the years to increase the lump sum due to the child when they turned 18. The CTFs have various tax benefits and on maturity the child could transfer them into an ISA to retain the tax benefits. The scheme was scrapped by the conservative government in 2011, but by then there were already hundreds of thousands of pounds locked away in CTFs. In 2020 the first of the children started to turn 18 and many wanted to access their CTFs. Sadly, this is where the problems began.

In order to access their CTF ‘the child’, upon turning 18, needs to set up another bank account in their own name for the funds to be transferred to. For many this is straight forward and results in them having a much-appreciated sum of money to set them up in life.

Some of these ‘children’ are now adults who lack capacity to manage their property and financial affairs. These young people may be unable open a bank account in their own name and their parent or guardian cannot do it for them. This is what families are facing when trying to access their child’s CTF, and such family members are often the same people who paid funds into the CTF. The only solution in this case is for the parent or guardian to make an application to the Court of Protection for a Deputyship order. This can be a long, stressful and costly process. It involves mountains of paperwork, doctor’s reports and often legal representation at court. Many families are now faced with a massive headache to access their child’s money. Lord Blunkett recently told the BBC that “mistakes were made” by the Labour government that set up Child Trust Funds.

If a person lacks capacity to manage their property and financial affairs then they cannot open a bank account and require a Deputy to manage their affairs.  However, being a Deputy is not a role to be taken lightly. Notwithstanding the complex and time-consuming process to become one, once appointed, a Deputy is subject to onerous yearly reporting and regulatory framework. They must account for all spending and money received. If they do not, the Office of the Public Guardian who regulates Deputies can investigate them and even remove them if the feel a Deputy does not meet their standards. Where a person lacks capacity to deal with their financial affairs this ensures checks and safeguards are in place against financial abuse. It is only by way of a further Court application that a person may cease to be a Deputy.

The complications arose with the introduction of the Mental Capacity Act 2005 (MCA). The MCA was a ground-breaking piece of legislation that sought to enshrine into law decades of uncertain and mismatched case law surrounding people who lack mental capacity. Prior to the MCA there was a sort of one size fits all approach to mental capacity and often the feelings and wishes of the person who lacks capacity were not taken into account just because they lack capacity to make high level decisions. The MCA focuses on the concept of achieving best interest outcomes in the least restrictive way possible whilst also safeguarding the welfare of those who lack capacity.

This can be very upsetting for families who have managed their child’s benefits for their whole life as Appointee (a more informal appointment by the DWP). Many feel that they are no longer trusted to look after their loved one and this can place even more stress upon families already struggling to care for a disabled child.

The problem is that there are very good reasons that being a Deputy is such an onerous responsibility. A person who lacks capacity is vulnerable to financial abuse and we have seen a big increase in abuse of vulnerable people, practically during the pandemic when individuals were even more isolated than before. The yearly reporting and regulation are resigned to ensure there is no mismanagement of the person’s finances whether intentional or not. Deputies are also required to take out an insurance policy to protect the funds they are managing on behalf of the person who lacks capacity. This is costly and the duties continue even after the CTF monies have been used.

It is clear that in some cases these CTFs are only holding a few thousand pounds that may well be used for a one-off purchase or over a relatively short period of time and in these cases, it might not be necessary or appropriate for a Deputy to be appointed for life to manage such a relatively small sum of money. Obviously, when we are talking about tens of thousands of pounds that could last for many years a Deputyship is vital. The idea that families must jump through unnecessary hoops is not in the spirit of the MCA, which seeks to achieve the best outcome for the person who lack capacity in the least restrictive way possible.

What is needed is a separate pathway for families to access this money without the need to become the child’s Deputy when there is no other reason for the child to have one. Hopefully the government will soon see the light on this and introduce much needed reforms but until then families of a person who lacks capacity have no choice but to apply to become their deputy if they wish to access a CTF.

If you think you need legal advice in relation to mental capacity, the Child Trust Funds or Deputyship then contact our Private Client team who can talk you through the processes and provide you with tailored legal advice for you and your loved one.