Are there downsides to setting up a trust?

[Saracen]

My 17yo has a moderate learning disability. I feel that she is capable of making her own financial decisions on a day-to-day basis. She tends not to see the big picture, and her arithmetic skills are somewhat basic, but she is sensible and takes advice from people close to her. By the time she moves out of home in 5-10 years, I should think she could manage a weekly budget.

The issue is that she is vulnerable, easily led. She desperately wants to be liked. If anyone is cross, she always thinks it's her fault. I can quite easily imagine her being taken in by a romantic partner who is exploiting her deliberately, or who is simply bad with money and genuinely thinks a "loan" from her will fix their problems. Or by a friend. Or by a persuasive salesperson.

When she turns 18 next year, she'll get access to her £35k Child Trust Fund. She might inherit several hundred thousand pounds when DH and I die. I was thinking now is a good time to persuade her to put her CTF money into a trust as soon as she gets it. I could ask her sibling and her cousin to be trustees after my death. Both are very competent and would always have DD's best interests at heart.

Is there any reason not to do this?

Well the downsides are less control for DD and the additional burden of setting up and managing the trust. Although neither are necessarily a reason not to go down that route.

Yes, that was my thinking. Thanks!

I wouldn't even consider giving her the option to decide what she wants to do with the money once she's 18. Because of her cognitive impairment she could still decide not to or withdraw it etc and I am horrified by the idea. Someone with dementia is classed as vulnerable and can have an appointee it's the same with learning difficulties or if they are vulnerable in some way you can get still get an appointee because you can show that they are cognitively impaired and can't manage their money as they are susceptible to being taken advantage of, which is nothing to do with learning how to budget.

Not everyone with dementia, learning disabilities or other vulnerabilities lacks capacity to make their own decisions.

If OP’s DD has capacity then OP won’t be able to stop DD doing as she wishes with the CTF money, even if those decisions are unwise. If she doesn’t have capacity OP’s DD won’t be able to access the CTF money.

Being appointee is for benefits only. If someone lacks capacity and there are others financial matters that need dealing with (e.g. a CTF) deputyship would be required.

If OP's daughter has got learning difficulties and as a result is likely to make very unwise and serious decisions that she wouldn't make if she didn't have them, as she doesnt understand the consequences, wouldn't that count as incapacity.

Just because someone makes unwise decisions doesn’t necessarily mean they lack capacity.

OP’s DD may lack capacity, but she may not, there is not enough information for anyone here to say for certain, but the fact OP knows enough to know about Trusts suggests she has probably considered capacity/whether deputyship is required.

Thanks for your thoughts, everyone! My understanding is that the legal bar for taking over control of someone's finances is rightly quite high, and I don't think it's at all clear-cut in my daughter's case. She doesn't squander her pocket money. If anything she is very cautious and frightened at the prospect of running out of money, having heard so much about the problems people can get into, especially with all the news stories about the cost of living crisis.

Also, so far my daughter has never been exploited by anyone, financially or otherwise. That is partly luck and partly because I watch over her so closely. There have been a few close calls in which I intervened, but it could be argued that I was being overprotective and there was no danger. It's only because I know her so well that I see signs that she would be highly susceptible to manipulation. I doubt I could prove that to anyone else. I should think they might suspect that I was trying to exploit her.

And I don't want it to be unnecessarily difficult for her to be given full control of her money later. I do know that many people with LDs continue to mature well into their 20s and 30s. At this moment I'm sure she will be vulnerable at 18, but I'm open to the possibility that that won't be true when she's 30. I thought if the money is in a trust and the trustees know her well, there is the option for them to hand full control to her if and when she's ready to take it on.

@Saracen Mencap have a lot of useful advice on trusts

Thank you!