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Client wants to open a savings account for her child
Our client is receiving means tested benefits and PIP, she wants to open a savings account for her daughter and save a regular amount each month, I read that it will be disregarded, if under £3000 but also read that you can’t save your benefits, any advice on this query please?
There is no rule that someone on benefits can’t save money. It may be that it is practically difficult for many on a subsistence income.
She can set up a child savings account at a mainstream bank and pay into that. It will be clear that the money is held on trust for the child and not for her own benefit.
As this will be the child’s capital and not the claimant’s, it is completely ignored. There is no limit, whether £3000 or otherwise.
Could you provide a bit more detail Elliot? It’s a question that comes up now and then (and fairly often in online advice groups on Facebook etc). I’ve never been quite clear on the answer.
Are aspects such as the child’s age relevant? In terms of their ability to manage their own finances etc - i.e. where the parent still marshals the money on a daily basis.
What about discretionary aid, such as from the Scottish Welfare fund (and southerly equivalents)? They usually has a it as a criterium that there are no savings etc - which is strong disincentive to save for many.
In the area I work now it is very common for parents to deposit their full CB directly into a credit union account for their children.
Maybe what I’m asking is just about the meaning/implications of trusts(?)
Maybe what I’m asking is just about the meaning/implications of trusts(?)
The nature of a trust is that there is severance of the legal ownership (i.e. the person who holds it, spends it, moves it around etc.) and beneficial ownership (i.e. the person who ultimately is entitled to the benefit of it).
An adult can receive a gift, but a child lacks the legal capacity to do so. So, instead, if you wish to make a gift to the child, you would hand the legal ownership of the money over to some responsible adult to hold it on trust for the child. The adult would therefore be a trustee and the child the beneficiary of the trust. This is invariably how a child savings account will operate; the parent holding the funds on trust for the child.
The important point from a benefits perspective is that it is only the beneficial ownership which matters. In the context of a child savings account, this means that the funds are not part of the claimant’s capital because they are not within the claimant’s beneficial ownership. The fact that they are the legal owner of the money is irrelevant.
What is important is that there is a clear delineation between funds held on trust and the claimant’s own money. If the money which is nominally the child’s savings is held in the same place as the rest of the money, then it will be difficult evidentially to establish that it is held on trust. Or if the claimant dips into the child’s savings account in order to pay for living costs or whatever, then it may be argued that it is just a sham.
The exact limits of trust law differ between England and Wales and Scotland, so you need to exercise some caution in relying on some of the authorities, but the basic points are still the same so far as I am aware.
[ Edited: 22 Nov 2022 at 01:15 pm by Elliot Kent ]As this will be the child’s capital and not the claimant’s, it is completely ignored. There is no limit, whether £3000 or otherwise.
I think there may still be a £3k limit for those receiving support for their child/ren through IS/JSA.
Been reading a few reports about how difficult many parents are finding accessing Child Trust Fund accounts when their children turn 18 years but don’t have mental capacity to deal with such things. Another aspect to think about at least.
As this will be the child’s capital and not the claimant’s, it is completely ignored. There is no limit, whether £3000 or otherwise.
I think there may still be a £3k limit for those receiving support for their child/ren through IS/JSA.
True although this won’t affect anyone whose claim started in the last 20 years or so,