When Do I Need a Power of Attorney in Alabama?
No one wants to think about becoming mentally or physically incapacitated, let alone plan for it. However, it's a possible part of life and a significant part of your estate planning in Huntsville, AL.
Having a power of attorney ready to take over and manage your affairs should something go wrong isn't a luxury. It's a necessity if you want to maintain your assets and all that you've worked hard for, as well as ensure that your family remains provided for.
In this article, we're going to tell you everything you need to know about the what, why, and when of needing a power of attorney in the state of Alabama.
Read on to learn more.
What Exactly Is a Power of Attorney?
A power of attorney (POA, for short) is legally binding. This document allows you to appoint an agent to manage your affairs should you become unable to manage them yourself. Your agent is also referred to as the attorney-in-fact, as they will take over the decision-making should you become incapacitated.
You should be aware of a few different types of POAs when estate planning in Huntsville, AL. The most common types include the following:
General Power of Attorney. This is the most common type of POA. In this situation, your appointed agent will be responsible for managing all your affairs, such as opening financial accounts, taking care of personal finances, running your business, and so on. However, the general POA's duties are terminated once the primary individual—also referred to as the principal—becomes incapacitated, revokes responsibilities, or passes away.
Durable Power of Attorney. The arrangement for a durable POA is a step up from that of a general DOA. This agent will act on your behalf to manage all of your affairs. However, there's a durable clause in the document which maintains their power and responsibilities even after you've become incapacitated.
Special or Limited Power of Attorney. In this instance, your appointed agent is given limited power as they are only responsible for specific duties. For example, This agent could be the person you would want in charge of your physical properties, which means they would be granted the authority to sell your home or other properties if necessary.
Springing Durable Power of Attorney. If you were to appoint a Springing DOA agent, it would mean that their power and responsibilities become effective only when a specified event occurs. For example, the event could be a medical event during which you become mentally incapacitated or have to take a leave of absence from your business for whatever reason.
It should be noted that your POA is not the same thing as the executor of written wills and trusts. Your POA steps in once you become mentally or physically incapacitated and cannot manage your own affairs. Whether or not they remain in control after a certain amount of time and their responsibilities is up to you.
What Exactly Does a Power of Attorney Do?
It's essential to understand what a POA typically does—and what they don't usually do. Generally speaking, your POA agent is the person that can take on the role of acting principal on your behalf. In other words, they should be ready and able to take on all or most of your decision-making responsibilities regarding your finances, business, real estate, and so on.
Having said that, here's what a POA's duties include (on your behalf):
● Buying and selling your property
● Financial management of any accounts, investments, bills, and so on
● Signing contracts and carrying out lease agreements
● Overseeing active investments, expenditures, and the borrowing of money
● Filing your personal and/or business tax returns
● Applying for government benefits
● Signing legal documents
● Speaking with doctors, overseeing medical care, and paying medical bills
● Caring for and making decisions about pets
● Managing staff, including the hiring or firing of
● Updating or purchasing insurance policies
As mentioned earlier, your POA agent's responsibilities and authority can be as broad or as confined as you choose. What they aren't allowed to do should be stated explicitly within the POA document, and you should make sure that the agent you appoint can be trusted to manage your affairs while you're incapacitated.
Is a POA Always Needed for Estate Planning in Alabama?
While it's not mandatory to appoint and legally register a POA in the state of Alabama, any Huntsville attorney would strongly advise that you do. You'll need a power of attorney if you become mentally incapacitated and cannot manage your financial, business, real estate, and even personal affairs.
Without a registered POA, your affairs' responsibility would revert to the state. When this happens, the probate courts usually take over and appoint a guardian for your children (if you have any) or a conservator to oversee your estate.
If it comes down to an event where you're too sick to make your own decisions medically, without a POA or a chosen healthcare decision-maker, the state or hospital care team will turn to your family by Alabama law. This means they'll start by turning to your spouse, adult children, parents, adult siblings, and then the next closest relative until they find someone who can take over the medical decision-making.
What Are the Benefits of Appointing a Power of Attorney?
Don't underestimate the importance of appointing a POA. Keep in mind this is planning for an event in which you may become mentally incapacitated while still alive. It's possibly even more important than appointing an executor for your estate upon death.
When you choose and register an agent as your POA, here's how you'll benefit:
You'll have someone who can manage your finances and run your business according to your wishes.
You'll have someone ensuring you get the medical assistance you need and that your medical bills are paid for
They can help you avoid a stressful costly conservatorship court proceeding. (In Alabama, if you don't have a POA, your family will have to endure the stress of gaining conservatorship which requires three separate lawyers. To say that it's a costly event is putting it mildly).
Having a POA will keep your options open for long-term healthcare planning. By explicitly giving them the authority to create trusts or make gift donations above the federal gift tax exclusion amount, your POA can help you maintain your assets and take care of any Medicaid or VA benefits planning.
Having a POA protects your heirs from becoming disinherited. This is because when you appoint an agent, you won't end up making the mistake of adding a child's name to your bank account or transferring assets to them right away. When you do this, you're making your assets and money available to your children's creditors and other possible liens while also inadvertently disinheriting them if their name isn't on your bank account. The same goes for transferring the deed of your home or other properties to your children.
Essentially, having a designated POA to act on your behalf should you become mentally incapacitated will ensure that your affairs remain in order and that no one has to suffer through conservatorship court and that no one has to lose out on their inheritance. It also ensures you get the medical care you need without becoming financially depleted.
Choosing the Right Agent as Your Power of Attorney
When choosing someone as the agent for your POA, select someone you trust. Not all POAs act as they should, so it's essential to evaluate the people in your life who are most trustworthy, business savvy, and responsible.
Additionally, you'll want to consider updating your POA as you age and things change. You'll also want to appoint a secondary POA should your primary choice be unable to meet your needs at the time.
If you aren't sure who to turn to for this responsibility, reach out to us today to speak with Sarah S. Shepard or another experienced Huntsville attorney. We'll ensure that your POA is up to date, and we can help you appoint the right agent.