By Stephen Farmfield, Director of Paladin Group – Expert Witness & Specialist Financial Planner

Investment planning for children is often assumed to be relatively straightforward. A long time horizon, combined with limited immediate spending needs, can suggest a simple growth-focused approach. However, in the context of litigation and Court of Protection matters, the reality is often far more complex. 

This is particularly true where a child currently lacks capacity but may regain it in early adulthood. In these cases, the challenge is not simply preserving and growing damages, but managing a transition from protection to independence within a relatively short and uncertain timeframe. 

A key risk in this scenario is the “cliff edge” at age 18. Many conventional structures, such as Junior ISAs or bare trusts, result in full legal ownership and unrestricted access at that point. While appropriate in some cases, this can create difficulties where capacity has only recently been established, or remains fragile. An individual may technically have capacity to manage their finances, but lack the experience, confidence or resilience to make informed decisions, particularly when faced with a substantial fund. 

In our experience at Paladin, this is one of the most important and often underappreciated risks in planning for children. Capacity is rarely a binary concept. It may develop gradually, vary over time, and be influenced by the complexity of decisions being made. As such, an “all-or-nothing” approach to access at age 18 may not reflect the practical reality of the individual’s situation. 

Instead, planning should seek to support a gradual transition to financial independence. This often involves structuring assets in a way that allows for phased access to capital, rather than a single point of unrestricted control. A blended approach may be appropriate with some funds available to the individual in early adulthood to support autonomy and learning, and other elements retained within more protective structures to provide longer-term security. 

This has clear implications for investment strategy. While the overall time horizon may remain long, the period between ages 18 and 25 often becomes particularly significant, as this may coincide with a reassessment of capacity. During this phase, the focus may shift from pure growth to a balance between growth, stability and liquidity. Ensuring that appropriate funds are available to meet anticipated needs such as education, housing or general living costs without requiring significant changes to the investment strategy at short notice is an important consideration. 

At the same time, it may be appropriate to reduce investment risk in respect of funds that are expected to be accessed in the near term, particularly where this coincides with the individual gaining greater control. This helps to avoid the additional challenge of managing investment volatility alongside the responsibilities of financial decision-making for the first time. There is no “one size fits all” solution, and bespoke financial planning is essential to achieving appropriate outcomes. 

An often overlooked, but equally important, aspect of planning in these cases is financial education. Where there is a realistic expectation that a child will regain capacity, there is both an opportunity and a responsibility to support the development of financial understanding in the years leading up to that point. This does not need to be formal or overly technical, but can include basic concepts such as budgeting, saving, and the role of long-term investment. Ensuring that the individual is included in financial review meetings can be a valuable first step in helping them to understand the resources available and the importance of those funds for their future. 

At Paladin, we have found that introducing these conversations gradually, and in an age-appropriate way, can significantly improve outcomes. It allows individuals to build confidence and familiarity over time, rather than being faced with complex decisions at the point they first gain control of their funds. Conversely, where this transition has not been managed carefully, young adults can feel overwhelmed by the sudden removal of support and the complexity of the decisions they are expected to make. 

Alongside financial education, it is also important to consider what supportive structures may remain in place once capacity is regained. Introducing these concepts early can help to avoid a situation where all formal support falls away at the point capacity is established. In our view, one of the most effective options in appropriate cases is a Personal Injury Trust. This can retain protection against means-testing of benefits, allow for continued professional oversight (where a professional trustee is appointed), and provide a framework within which the individual can begin to take an active and supported role in financial decision-making. An additional benefit is the degree of protection such structures can offer against external pressures, which can be particularly relevant for young and potentially vulnerable adults. 

Collaboration between advisers, deputies, case managers and families is also key. Each plays a distinct role in protecting the individual’s best interests, but alignment of approach is essential particularly where planning decisions made during childhood will have lasting consequences into adulthood. Early engagement can help to ensure that structures and strategies remain appropriate not only for the current position, but for the anticipated transition ahead. 

Ultimately, planning for a child who may regain capacity is not simply an exercise in investment selection or tax efficiency. It is about recognising the uncertainty inherent in these cases and designing a framework that is sufficiently flexible to adapt over time. By focusing on the transition from protection to independence rather than viewing these as separate stages it is possible to support more sustainable and positive long-term outcomes. 

**This article appeared in the PDF’s Quarterly Journal Deputyship Matter (June Edition)**