New Year, New Law

The turn of the calendar year signifies a lot of change in society. The first of the year also brings with it many new laws going into effect on January 1. Alabama has adopted a new Power of Attorney Act, which will apply to all powers of attorney executed on or after January 1, 2012. Some significant changes include:

1. Powers of Attorney are Presumed “Durable”

Under prior law any authority granted under a power of attorney would immediately terminate upon the incapacity of the principal. In order to allow a power of attorney to survive incapacity, the document had to state it was “durable” and would survive any incapacity. The new Act changes the presumption and all powers of attorney will be durable unless the document states otherwise.

2. Authority of Co-Agents

A person has the ability to name more than one person to serve as agent at any one time. There may be times when it is appropriate to have two individuals serving as agents. Section 26-1A-111 creates a presumption that where two or more agents are named to serve at the same time, they can each act individually without consulting the other. If you want your agents to work together and be in agreement before any decision is made, then you would need to explicitly state that the power is joint and not joint and several.

3. Appointment of Successor Agents

Section 26-1A-111(b) allows a principal to allow someone (including an appointed agent) to name one or more additional successor agents at a later time. This provision can be effective in cases of long-term incapacity, where the principal may “run out” of agents as time passes.

4. Enforcement of Documents

One of the most significant provisions of the new Act regards an individual’s or institution’s obligation to accept a power of attorney (see 26-1A-120). Under prior law, if you presented a power of attorney to a bank, it may refuse to honor it and you would have no legal recourse. The new law states that if a bank (or any party) has a question about a power of attorney, it can request a verification or opinion of legal counsel within a reasonable time. Once the verification is received, it must honor the power of attorney within a reasonable time or else it may be liable for damages.

The new law further prohibits an institution from requesting a new form or that the principal use the institution’s power of attorney. However, if an institution has a good faith reason to believe that the power of attorney is not valid, then they would not be liable for damages.

5. Specific Grants of Power

There are many times an agent will want to use a power of attorney to change a principal’s estate plan or general structure of financial assets. The new Act (26-1A-201) provides that if an agent wants to exercise any of the following powers, then the document must expressly grant those rights:

a. Create, amend, revoke, or terminate a trust
b. Create or change rights of survivorship
c. Create or change beneficiary designations
d. Delegate authority granted under the power of attorney to others
e. Waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan.
f. Exercise fiduciary powers that the principal has authority to delegate

6. Gifts

There are several restrictions on an agent making gifts of a principal’s property (which is not a bad idea). For example, you cannot give yourself any portion of the principal’s property unless you are related to them by blood or marriage. An agent must be careful about making any gifts, but should take particular caution when the agent itself will benefit. If the gift is not something the principal would have done if he or she were able, then the agent may be liable for a breach of fiduciary duty.

Further, section 26-1A-217 states that unless otherwise stated, any gift to an individual shall not exceed the annual gift tax exclusion (currently $13,000). There may be situations where an agent needs to make a gift exceeding $13,000, but the document itself would have to allow such flexibility.


The new Act greatly enhances the effectiveness of a power of attorney, which can be advantageous if you find yourself handling the financial affairs of a loved one. The Act only applies to powers of attorney executed on or after January 1, 2012, so in order to achieve maximum effectiveness for your document, you may want to add executing a new power of attorney to your New Year’s resolutions.

New Procedure at Probate Court

Effective April 1, 2009 the Jefferson County, Alabama Probate Court will begin requiring the production of a certified death certificate in order to open an estate administration. Even thouogh it may cause some additional delay for families, it is probably a good practice. I had always been surprised it was not a requirement before!

Paws and Patriots

Please consider joining the Alabama War Dog Memorial Foundation for the 2008 Paws and Patriots Walk and Festival at Heardmont Park on September 6. For more information, please visit our website (below). It will be a great family event. In order to maintain the integrity of this legal blog, I must add that you should not forget to include charitable beneficiaries (such as the AWDM) in your Last Will and Testament!

www.pawsandpatriotswalk.com

Powers of Attorney- Part 7

The Document Itself

A power of attorney is conceptually a simple document. It names someone to act on your behalf. However, this simple concept does not necessarily mean that the document will be short or concise. A one page doocument (they are out there, I have seen them) that names "John Doe as my agent under this power of attorney" and nothing more would probably not be effective. Here are some tips about what to include in your Durable Power of Attorney:

-A long list of powers for your agent. The general rule of thumb is that if a power is not specifically listed in the document, then the agent does not have that power. I therefore recommend that you err on the side of over-inclusion, as you never know which powers you will need in the future.

-A statement that the power of attorney is "durable" and that it will survive the grantor's incapacity.

-Language specifically referencing medical records, making sure to include the magic acronym, HIPPA.

-A statement about the agent's responsibility for health care.

-It is helpful to include a statement that photocopies will have the same force and effect as an original.