5 Things to Know About Powers of Attorney in Alabama

Oct 9, 2018 | Estate Planning

1. A power of attorney (POA) is probably the most important part of a basic estate plan. 

Planning for incapacity is arguably more important than planning for how property will pass at death. While the loss of a loved one can be devastating, there is no longer a need to make medical decisions or provide care. When a person becomes incapacitated, their needs don’t end – they increase, sometimes dramatically. An incapacitated person likely needs medical care, assistance with activities of daily living, and someone to pay their bills and manage their finances. An incapacitated person desperately needs someone who is legally empowered to act on their behalf.

​2. A power of attorney can help avoid an expensive, stressful conservatorship proceeding. 

If an incapacitated person doesn’t have a power of attorney, the alternative is for a family member or friend to get a conservatorship. To say that this process is expensive and stressful is putting it mildly. In Alabama, a conservatorship will require you to pay for three lawyers:  a lawyer to file the conservatorship petition, a lawyer to serve as a temporary guardian ad litem, and a lawyer to serve as a court representative. The incapacitated person is often required to attend the court hearing, which can be especially difficult for an elderly person with cognitive deficits. Finally, the conservator will be required to post a bond, file an inventory, and make regular accountings to the court. A power of attorney is the easiest and least expensive way to avoid a conservatorship.

3. Alabama enacted a new Power of Attorney law in 2012. 

Powers of attorney are governed by state law. Alabama law on powers of attorney received a complete overhaul in 2012. The new law applies only to POA’s executed in 2012 and later. Powers of attorney that predate 2012 are governed by the old rules. As institutional knowledge of the old rules fades, banks and financial institutions will have an increasingly difficult time interpreting POA’s that predate 2012. The best approach is probably to get an updated one.

4. A properly drafted power of attorney can keep options open for long term care planning. 

This is the key difference when you obtain a power of attorney from an elder law firm. Most standard form POA’s do not authorize the agent to create trusts or to make gifts above the federal gift tax exclusion amount. Without these powers, the ability to preserve assets in a long-term care crisis is very limited. However, including these powers requires a careful risk/benefit analysis. An elder law attorney who understands Medicaid planning and VA benefits planning can help you decide whether to include these powers in your POA.

5. Joint accounts and outright gifting are poor substitutes for a power of attorney. 

People who engage in do-it-yourself incapacity planning often add a son or daughter’s name to their bank accounts. They may also transfer assets to their children, usually the home. Neither of these is a good idea. Adding a son or daughter’s name to a bank account will make the parent’s asset available to the child’s creditors. It may also disinherit other heirs who are not added to the account. Deeding the home to a child results in the same problems:  it makes the home available to the child’s creditors and may disinherit other children.  In addition, if the home has increased in value, it could have unintended tax consequences. 

So when is the best time to get a new or updated power of attorney? Now.

To learn more about powers of attorney and other elder law topics, register for one of our free workshops today. These workshops provide information about planning options and preparation for life changes. We welcome everyone, including seniors, caregivers, and financial professionals and their clients. To sign up for a workshop, call our office at 251-421-6014 or register here.

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