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Hope for families locked out of Child Trust Funds

Written by: Emma Lunn
Families seeking access to small Child Trust Funds (CTF) belonging to loved ones who lack mental capacity will benefit from a simpler and quicker system, under plans set out by the government.

Under the proposals, a new streamlined process would allow withdrawals and payments from cash-based accounts, such as a Child Trust Fund (CTF) or a Junior ISA, up to £2,500, without the need to get permission from the Court of Protection (CoP).

Currently, if a person lacks mental capacity and as a result cannot manage their finances, a family member or guardian must apply to the court to manage these funds. This is to protect vulnerable people from fraud or abuse.

However, concerns have been raised that this can be a disproportionately costly and lengthy process to access relatively small amounts of money. The government has therefore today launched a consultation on a new system to ease the administrative burden on families.

The proposed scheme would be run by the financial services sector and would maintain important safeguards. This could include requiring medical evidence to certify the account holder lacks mental capacity to manage their own financial affairs, verification that funds will be used in the best interests of the account holder, and paying money directly to the provider of goods and services as opposed to the applicant.

Under the proposals an applicant would have to prove their suitability to access the fund on behalf of the individual, rather than it being limited to only family members. For example, a guardian could apply.

Withdrawals would be up to a total value of £2,500 over a six-month period, with the possibility of a single extension if the full value of the account had not been withdrawn.

In cases where longer term management of accounts is needed, families and guardians will be encouraged to consider a deputyship and to apply to the Court of Protection if necessary.

The move follows an announcement last year that families who must apply to the Court of Protection to access a CTF could be eligible for a fee remission, and that a working group would consider further improvements to the process.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “There’s new hope for families locked out of Child Trust Funds. Today’s proposals would offer a workable alternative, so that families could access the money in a few weeks, with a minimum of hassle. It will come as a huge relief to those who are struggling to get hold of money they need to improve their child’s life.

“The current process of applying to the Court of Protection requires endless forms and waiting more than five months on average. It’s another needless stress and hassle for parents on top of everything else, which is one reason why so far only 28 people have gone through this rigmarole to access money in a CTF.

“By saving and investing for their children, they were working hard to do the right thing, so it’s horrible that they should be finding it so hard to get hold of money that rightly belongs to their offspring.

“Change is going to require legislation, so it won’t come overnight. However, parents of children under the age of 18 who will lack mental capacity when they reach 18, can take a useful step to protect themselves in advance. Under the current rules, if they have more than £2,500 in a matured Child Trust Fund, they can’t access part of it, so they can’t get hold of any of it using the new system. If they move to a CTF provider who rolls it over into an ISA on maturity or switch to a Junior ISA which does the same thing, then when their child turns 18, they will be able to access the first £2,500 of the money under the new system.”

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