It is not uncommon for some clients who are considering making a lasting power of attorney (LPA) to conclude: "What's the point?"

For the fit and healthy it may seem like an unjustified expense: something that can be thought about in the future when it's needed. Unfortunately that time will be too late if a person is mentally incapable of making an LPA. So what are the possible repercussions of not making an LPA?

Let's illustrate this with a case study, based on circumstances many of us will be familiar with when dealing with an elderly relative.

Jim is 80 years old. He is a widower of two years and lives by himself. He has two children and both of them live nearby. He is the sole owner of the home where he lives which is worth £250,000. He has some savings in the bank, a few stocks, shares and bonds, and he receives the state pension and income from two private pensions (one left over from his late wife's employment). He does not drive anymore and finds getting about difficult, but he's very grateful for the help from his son and daughter.

Jim has been diagnosed with dementia and the early onset of Alzheimer's. To his son and daughter the signs are all too apparent. Jim is confused, does not remember names and places and has on a few occasions been found wandering the nearby roads. As his condition deteriorates some difficult decisions have to be made. Jim cannot look after himself and he will have to go into a residential care home.

Because of his assets he will have to pay for his own care. The savings can only go so far. His house is a burden and needs repairs, but because of the circumstance should now be sold. Jim will not be able to return home. The problem is, who can sell the house? Jim's lack of mental capacity means he cannot enter into a contract to sell the house. There are also other financial pressures to encash some of his investments so other bills can be paid. He cannot do any of this himself and there is no legal authority for anyone else to act on his behalf.

As there is no Lasting Power of Attorney someone will have to apply to become Jim's Deputy for property and financial affairs in order to gain control of Jim's assets. To become a Deputy there is a set application procedure. Jim's mental capacity will have to be formally assessed. His personal finances must be disclosed to the court.

The Court fee to apply is £400, with an additional £125 payable if the Applicant is successful. Legal fees would be around £1,000 and the mental capacity assessment is likely to have incurred a fee. There will also be a security bond to be purchased on the Deputy's appointment. So, total costs could be £2,000 or more. In addition, annual returns will need to be filed and usually an annual premium paid for the bond.

The whole application is likely to take around three months. During this time contracts cannot be exchanged on Jim's house and there will be no access to his bank accounts, investments or savings. Jim's family may have to pay the initial costs before being reimbursed.

How would this be different if Jim had made a property and financial affairs LPA?

The costs would be much lower. Registering an LPA incurs a fee of £120 payable to the Office of the Public Guardian. Legal costs will be considerably less than the legal costs of making a Deputy application.

If Jim had registered the LPA at the time he made it, the three month waiting period would have expired by the time the attorneys need it most.

Most important of all, Jim would have peace of mind that if anything were to happen to his mental capacity in the future that his attorneys would have the legal authority to effectively deal with his affairs.

If you require any further advice or assistance please contact Warren Hawkings or a member of the Wills, Probate, Tax and Trusts team at Wortley Byers on 01277 268345 or whawkings@wortleybyers.co.uk.

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