Have you ever thought about what would happen to you, your estate, your business, children, assets, or even your pets if you were to lose the ability to speak or became cognitively impaired?
While these are not things we want to think about, they can still happen—which is why it’s essential to plan for them.
One way to plan for your financial and legal affairs should you become mentally incapacitated is by appointing a durable power of attorney.
In this article, we’re going to discuss what it means to have a durable power of attorney so that you can make the necessary arrangements when the time comes.
What Exactly Is an Alabama Durable Power of Attorney?
When we talk about an Alabama power of attorney (POA), in general, we’re talking about the legal document that permits a specific person to act for another person in financial and legal matters, including during illness or disability.
Under Alabama law, the person who appoints the POA is the principal. In contrast, the designated person is known as the agent or attorney-in-fact. Depending on the principal’s discretion, the agent in question can be given broad or limited authority in terms of making legal decisions regarding the principal’s medical care, property, finances, business, etc.
A durable power of attorney stays in effect if you become incapacitated, and in Alabama a financial power of attorney signed in 2012 or later is durable unless it says otherwise.
In other words, your agent can keep handling your financial and legal matters if you become incapacitated, and the power of attorney ends at your death.
Therefore, assigning a trusted agent to be your durable power of attorney is a means of planning for the future. Especially when you may face a significant cognitive decline and cannot make any competent authoritative legal decisions on your own regarding your affairs.
What Can a Durable Power of Attorney Do and Not Do?
Generally speaking, the agent you name in an Alabama power of attorney handles the matters your document covers, including after you become incapacitated.
Your agent’s authority typically includes the following actions:
● Buying and selling of property
● The financial management of your bills, bank accounts, investments, safety deposit boxes, charitable donations, etc.
● Executing leases and signing contracts
● Spending, investing, and borrowing money
● Filing tax returns on your behalf
● Applying for government benefits on your behalf
● Signing legal documents on your behalf
● Paying medical bills
● Caring for and making decisions about pets
● Potentially making hiring and firing decisions for staff
● Buying or modifying insurance policies (changing beneficiaries requires specific authority)
Because of all the responsibilities and authority that a durable power of attorney may take on, it’s important to assign one while you’re still deemed mentally competent.
Also, as mentioned above, your durable power of attorney’s responsibility and authority can be as broad or as limited as you choose. Some powers, like creating or amending a trust or changing beneficiary designations, exist only if the document grants them expressly.
Additionally, when we talk about the durable power of attorney and healthcare, it’s essential to understand that there is a difference between these documents. Unless the agent has also been assigned as the durable healthcare power of attorney, a financial power of attorney gives them no authority over your health care decisions.
What Happens if I Don’t Have a Durable Power of Attorney?
Suppose you or someone you love suddenly becomes mentally incapacitated without a durable power of attorney. In that case, your family may have to ask the probate court to appoint a guardian or conservator, which takes time and expense.
To obtain a guardianship, your family must file a petition in probate court, and whoever the court appoints acts under its supervision.
A guardian makes personal and care decisions, while a conservator manages money and property.
The court follows a priority list that favors family, and may choose someone else if that serves the person’s best interest.
How to Choose the Right Person as Your Alabama Power of Attorney
It’s essential to assign a durable power of attorney while you are still mentally competent. It’s also imperative to assign the right person. Appoint someone you can trust to carry out your affairs and take care of your business and belongings exactly how you’d want them to.
While it’s hard to monitor your agent if you become incapacitated, you can build safeguards into the document, such as requiring your agent to report to someone you trust.
Your power of attorney should work together with your will or trust. If you would like to talk with Sarah S. Shepard about choosing your agent and coordinating your documents, schedule a consultation.
Sarah S. Shepard is an estate planning attorney at Sparkman, Shepard & Shepard, LLC in Huntsville, admitted to the Alabama State Bar in 2012. She prepares wills and trust-based estate plans for families in Huntsville and North Alabama. More about Sarah S. Shepard.