Until someone can lawfully make a decision about the account, CTFs continue as matured accounts. This preserves the tax advantages of the wrapper, but there can be no withdrawals or further payments in, and no changes can be made to investments held.
Junior Isas automatically convert to adult Isas (either cash or stocks and shares) on the day the child turns 18, but encounter the same problems.
As a result, there is no ongoing management of the savings and investments in these accounts. Vulnerable young people are at risk of not only being unable to access their savings when they need them, but also of having them eroded by poor market performance and fees.
What’s more, if the value of these accounts is more than £6,000, their entitlement to universal credit could be reduced despite the difficulty accessing the funds.
Legal authority
There are two main legal authorities that allow a person to manage a matured CTF or Isa on a young person’s behalf: a property and affairs lasting power of attorney; and a deputy order.
A property and affairs LPA (or an enduring power of attorney in Northern Ireland) can be made by someone aged 18 or over and when they have capacity to do so.
The ability to make a decision (or not) is not always constant and may fluctuate. An LPA can be entered into by someone with fluctuating mental capacity, so this may be an option in some circumstances.
An LPA must be registered with the Office of the Public Guardian at the outset for it to be valid. This normally costs £82 (£164 if also applying for a health and welfare LPA) but can be waived if the donor is receiving means-tested benefits or reduced if they are receiving universal credit or have earnings under £12,000.
The LPA remains valid if the donor goes on to fully lose mental capacity.
The alternative is a deputy order. This can be applied for when there is no LPA in place and a person has already lost mental capacity. An application must be submitted to the Court of Protection where it will be assessed.
The timescale for this process varies and has been known to take six months or more.
In addition, there is an application fee of £371. Further fees may also be due if the court unusually decides the application requires a hearing, plus a one-off assessment fee for new deputies and ongoing supervision fees.
Although reductions and exemptions to some of these fees are available in the same way as fees for registering LPAs, not everyone will be eligible. The process for applying for a deputy order can therefore be costly and time-consuming.
