Making financial decisions on behalf of a child

Most children’s lives are significantly influenced by their parents who are empowered by the legal concept of ‘parental responsibility’. Parents make all sorts of decisions for their children until such age as they’re able to do it for themselves. But in some families, that time never comes, because the young person doesn’t acquire the necessary mental capacity.

Mental capacity is someone’s ability to make decisions about their life. This may not develop in a person, or it may become lost through illness or an accident. And the older a young person gets, the more complex it can be to make decisions for them. Parental responsibility ends at adulthood. So, what happens when a child who lacks mental capacity turns 18? Who makes decisions about their finances? And how should those decisions be reached?

The government has published a toolkit to help parents and carers navigate the ongoing challenges of decision-making on behalf of young people – those between the ages of 14 and 25 – who lack mental capacity. I’ve summarised some of the key parts below:

When your child reaches 16

Parents continue to have parental responsibility and so you can make decisions for and about your child. However, in doing that, you must apply the five principles of the Mental Capacity Act:

Don’t make a decision for that young person unless you can show that they can’t.
Support the young person in making their own decision before making it for them (but don’t try to persuade them what to do).
If the young person makes a decision you think is unwise, don’t automatically take over; it doesn’t mean they’re unable to make a decision. But do question their capacity if they: (a) make repeated unwise decisions that put them at risk or harm; or (b) make a particularly unwise, out-of-character decision.
Anything you do, or any decision you make, for or on behalf of the young person must be in their best interests (we discuss ‘best interests’ here).
Before acting, or making a decision, for a young person, ask whether the same outcome could be achieved with fewer effects on their rights and freedoms.

When your child turns 18

A young person has responsibility for making their own decisions when they become an adult. But there are two ways in which you could make a decision on their behalf:

By getting their consent (and then applying the five Mental Capacity Act principles above); or, if the young person doesn’t have capacity to consent:
By applying to the court for authority to make the decision.

The Court of Protection is a specialist court that safeguards the interests of people who lack mental capacity. It’s a vital part of the system, helping protect some of the most vulnerable people in society. Where the court is asked to look at the situation of a young adult who doesn’t have capacity to make decisions about their finances, it could either make a one-off order (for example, to access money earmarked for a specific need) or, in urgent cases, an Emergency Interim Order. Or the court could appoint a ‘deputy’ to make ongoing decisions on the young person’s behalf. A deputy is often a member of the young person’s family, or a friend or carer.

The guidance makes clear that it’s good to think ahead. If the young person is under 18, but you think they will lack capacity when they reach 18, you could make the application to the Court of Protection in readiness for them reaching adulthood. That way, legal authority for decision-making will be in place when the time comes.

As private client solicitors, we often help clients through the Court of Protection process. We also help families plan ahead by putting lasting powers of attorney (LPAs) in place. These are important documents, but they can only be made when the young person has mental capacity. They appoint a trusted person – an ‘attorney’ – to make decisions about the person’s property and affairs, with specific instructions in place, if that’s what the young person wants.

Similar to a deputy, an attorney is usually a family member, friend or carer. Their decision-making remit could include:

Managing the young person’s bank account and investments
Paying bills
Selling the person’s home.

The LPA could also give the attorney legal authority to access the young person’s child trust fund, which matures when they turn 18.

An attorney must follow the Mental Capacity Act principles. This might mean, for example, that the young person continues to manage their day-to-day expenditure while the attorney takes care of the more complex finances. And any decision made has to be in the young person’s best interests.

Mental incapacity can be extremely difficult to deal with on both an emotional and a practical level. Whether a mental impairment existed from birth, or it took hold later in life, it generally falls to family members to take charge and be up to speed on the protective legal process. The government’s toolkit is a great start, explaining some of the main aspects, but it is important you take professional advice for your specific circumstances.

For for specific help in making financial decisions for a young person, contact Emma Howlett or a member of the Private Client team on 0808 256 2917.