Navigating mental capacity rules for child tax wrappers

In the first year 55,000 CTFs matured, and with the last CTFs due to mature in 2029, increasing numbers of young people are finding themselves needing to make decisions about their money, possibly for the first time.

Sadly, not all young people have the capacity to make decisions for themselves, with the Ministry of Justice estimating up to 126,000 young people may not have the capacity to access and manage their matured CTF when they turn 18.

The maturing of CTFs has shone a stark light on this issue, but it also impacts other accounts for children including Junior Isas and bank accounts. 

The Mental Capacity Act 2005 provides a framework for protecting vulnerable people who are unable to make some, or all, of their own decisions.

However, these processes can be onerous, and if the right legal authorities have not been put in place their savings can be left in limbo and may be difficult to access when needed. 

This article will examine how the rules for these accounts change when a child with a CTF or Junior Isa who lacks capacity becomes an adult, the legal mechanisms available to help your clients access these accounts on their children’s behalf, and key planning points to consider.

Transitioning to adulthood

The MCA 2005 applies to anyone aged 16 or over in the UK. The first of the five statutory principles of the MCA is that a person must be assumed to have capacity unless it is proved otherwise. Where possible, a person should be assisted in making a decision for themselves.

Only where a person is incapable of making a decision should someone else make the decision for them, and this must always be done with the person’s best interests in mind. 

Alongside this, until a child turns 18 their parents or legal guardians have parental responsibility for them. This, generally, permits them to make decisions for the child. 

At 18 the child legally becomes an adult and parental responsibility falls away. To continue making decisions for them, your clients will need to obtain legal authority to do so.

Start the conversation with your clients early. Inevitably there will be some clients who come to you only shortly before their child turns 18, or even afterwards.

This can be a contentious point where they have been managing their child’s accounts previously.