When a young person reaches 16, they have the right to manage their own money or ask someone else to do this for them. At 16 they can claim benefits for themselves. Claiming benefits in their own right has spin offs and can be the key to getting other sorts of help.

There are several benefits a young person may be able to get like Disability Living Allowance (DLA) and Employment Support Allowance (ESA), as well as other sources of financial help. Some young people may already be getting Incapacity Benefit in Youth (IBY) and Income Support (IS), but these are no longer available to new claimants and have been replaced by ESA. We discuss what's available and how to claim in the Benefits for over 16s section.

But be aware that what you and they decide may affect your own entitlement to benefits: so you may wish to take further advice.

At 20 a young person has to claim benefits in their own right, you can no longer claim child-related benefits for them. But at 16 the picture is not always so clear. Whilst a disabled young person may be entitled to ESA, as soon as they make a claim their parent must stop claiming child related benefits like Child Benefit and, more importantly for parents on low incomes, Child Tax Credits for that child and disabled child premiums.

Some of the questions you'll need to have considered are:

• What if your child can't manage their own money?
• Should a young person claim?
• If a child claims benefits as an adult, what benefits will change for parents?
• What should your child pay towards the care you give them?

What if your child can't manage their own money?

A young person can claim benefits in their own right even if they need someone else to act on their behalf. As awards for DLA are usually reviewed in the six months before a child reaches 16, claiming DLA as an adult is often the first time young people have to think about their ability to manage significant amounts of money.

In reality most disabled young people don't feel ready to take on this responsibility and ask their parents to look after their money for them, to pay their bills and give them an allowance. This means taking on the role of 'appointee'.

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Should a young person claim?

If your child is able to manage their own money, it makes sense for them to claim DLA for themselves as an adult at 16: if they do this, your teenager will still be considered a child for the purposes of other benefits like child benefit and child tax credits.

If a household isn't entitled to any Child Tax Credits (CTC), it makes sense for a young person to claim ESA if they meet the criteria because this is worth a lot more than the Child Benefit that will be lost.

If a household is getting the full entitlement to CTC and their child gets DLA, it probably isn't worth a young person claiming ESA at 16. If a household is getting a lower rate of CTC you may want to seek advice. Money Advice and Community Support Service (MACSS) and your local Job Centre Plus can help do a 'better off calculation': this should help you work out what makes the best financial sense in your particular circumstances.

Even at 18, parents need to look carefully at their family's individual circumstances. For example, a young person at residential college may have an underlying entitlement to ESA. But this income, just like the care component of their DLA, may not be paid because a local authority is paying for their care and lodgings, so it's not worth claiming this. However, benefits like Child Benefit (CB) and CTC are still payable so long as your child is under 20 and in full time non-advanced education, even if your child is away at school some of the time. So it makes sense to keep claiming these.

Some benefits, like DLA, are not counted as income. Other benefits like ESA are means tested: the DWP looks at other money coming in and savings, before they decide how much more a young person needs to live on. So their savings and any income from trusts, will be taken into account.

If your child is a beneficiary of a discretionary trust, as long as they aren't getting a regular income from this, and purchases made by the trustees on your child's behalf are irregular, the value of these shouldn't be taken into account when calculating your child's entitlement to benefits. It's worth knowing that parents' savings and income don't affect a young person's claim to ESA.

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If a child claims benefits as an adult, what benefits will change for parents?

1. You will lose Child Benefit

Parents are not entitled to claim Child Benefit if a young person claims Employment Support Allowance (ESA), even if their child is still at school.

If your child doesn't claim ESA or a training allowance, you can continue to claim CB, for children aged 16 and under 20, at school or college in non-advanced education, studying more than 12 hours a week. You can also continue to claim CB if you are responsible for a young person aged 16 to 19, who is registered with the Youth Employability Service, in unwaged work-based learning and for 19-year-olds completing some training courses.

If your child has left school, college or approved unwaged training and they are not claiming ESA, you can keep claiming CB until the first Sunday after the last day of February, May, August or November whichever falls first after the date they have left.

Parents of 16 and 17 year olds who leave education or training and are registered with the Youth Employability Service but not claiming ESA, may be entitled to a CB extension period over the following 20 weeks. Parents need to write and ask for the CB to continue. Your child must not be working more than 24 hours a week.

2. You will lose Child Tax Credit

Parents are not entitled to claim any child tax credit for a young person who starts to claim ESA. This will include the basic child element, a disabled child element and if your child gets the high rate for care, an enhanced disabled child element.

More about Child Tax Credit

Child Tax Credit (CTC) is a tax credit designed to help families with dependent children. If you are on a low or middle income and have only modest savings you are likely to be entitled. You can claim if you are responsible for one or more children who usually live with you. You can claim for children under 20 if they are in full time education, studying up to A level or an equivalent standard or if they are in unpaid work-based training.

If you have a child who gets any rate of DLA, the CTC you may be able to claim will include an extra Disabled Child Element.

If your child gets DLA at the high rate for personal care you may also be able to claim an additional Severe Disabled Child Element.

These credits are in addition to all the tax credits available to other families.

CTC is more generous than other benefits. Maintenance payments and most other benefits and allowances, including Social Fund payments are disregarded as income when HMRC (Her Majesty's Revenue and Customs) calculates your entitlement to tax credits.

If your child's entitlement to DLA changes, it's in your interests to tell HMRC about this as soon as possible.

If you aren't claiming CTC and think you may be entitled, ring the Tax Credit Helpline on 0845 300 3900.

3. Your Income Support will change

Income Support is for people who are not required to sign on for work and don't have enough money coming in to cover basic living expenses. In general parents getting Income Support or Job Seeker's Allowance, Local Housing Allowance and Council Tax Benefit will see changes to their benefits if their child claims benefits as an adult, so it's worth seeking advice about this. If your child does not claim ESA, you can also still claim the child disability premium of Income Support until their 20th birthday, or CTC, depending on your circumstances

Once a young person claims Employment Support Allowance in their own right their parent will have to:

• 'sign on' for work if they wish to claim Income Support themselves, unless they are also disabled.
• will lose the disabled child premium element of Income Support or Job Seeker's Allowance or the disabled Child Tax Credit they were claiming.
• will also lose the family premium element of Income Support or Job Seeker's Allowance, or the family element of Child Tax Credit, if the disabled young person is the youngest or only child.
• will lose the disabled child premium of any Local Housing Allowance they are entitled to claim.

However parents continue to be eligible for IS if they are on a low income and care for someone who gets the middle or highest rate of DLA for care, or get Carers Allowance, and for 8 weeks after that person stops getting DLA.

4. You can still claim Carers Allowance

Carers Allowance is a weekly payment for anyone who spends at least 35 hours a week looking after someone with an illness or disability but is not paid to do this. Even if your child's at school or college, it's easy to see that most parents will 'clock up' many more than this over a week.

You can claim CA and earn up to £100 a week after deductions (for tax, national insurance and other allowable deductions). Up to half your earnings can be disregarded if you pay someone who is not a 'close relative' to look after a child up to 16, or the disabled young person. You can claim CA even if you are getting DLA or attendance allowance for yourself. CA is taxed and it is counted as income if you claim other means tested benefits.

It's worth claiming CA even if you are on Income Support (IS), because although CA is deducted from your IS, claiming it protects your pension and makes you eligible for a Carer's Premium, so the amount you get in benefits will increase. You can get claim packs from The Carer's Allowance Unit on 0845 608 4321.

You can claim online at http://www.dwp.gov.uk/ This is straightforward because you are only asked for basic information. The online format takes account of your answers and skips irrelevant questions. You are sent a paper copy to sign and return.

The claim pack is simple and easy to understand. You are guided to relevant pages and it takes only a few minutes to complete.

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What should your child pay towards the care you give them?

Once your child starts claiming benefits it's a good idea to agree how much your son or daughter will contribute to the household bills, how much to pay towards the care you give them, and other stuff like the cost of running them around in the car and so on. This way, at least any changes in either of your financial circumstances shouldn't leave you out of pocket and the young person will get a better idea of how much it costs to live and how far their money goes.

It's probably time to start thinking about how you would manage without your child's contribution. The bottom line is that this is their money and sooner or later most of our children will fly the nest to live more independently. When they leave home, their housekeeping will go with them. So once your child is 16, it's probably time to start planning your future and thinking about how you would manage without their money.