Distribution of Personal Property

I came across a very touching post about the distribution of personal property from an estate.  I really liked reading the Echoes of a Life http://susansoundings.wordpress.com/2012/07/31/the-echoes-of-a-life-2/

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.

The Definition of Estate Planning

I heard a quote today from the book Loving Trust, which I feel is the best description I have heard of estate planning:

"I want to provide for myself and my loved ones during my lifetime, and, upon my incapacity or death, give what I have to who I want, the way I want, when I want, and, if I can, save every last fee, tax or court cost whenever possible."

New Year - New Resolutions

I always enjoy the turn of the year. It is not only a time to reflect on the past, but also an opportunity to think about the future. Many people enter the new year with one or more "resolutions," most often involving some type of weight-loss program. I want to offer an easier and more significant resolution for your consideration (easier and more important-how can you argue with that?).

I recommend that you take the new year to ensure that your financial and legal house is in order. All too often financial and legal matters are not addressed until there is an emergency or a real need and by that time, it is too late to adequately address these matters. You may want to consider addressing them now, so that if a need ever arises, you and your family are protected.

The following is an example of some steps you can address this year:

Seven Steps to Protect Your Family

Action Item

1. Sign a Will and/or Trust to direct the disposition of property at death

2. Obtain a Durable Power of Attorney

3. Obtain an Advance Health Care Directive

4. Document Funeral/ Burial Wishes

5. Create a Personal Record Book, containing such items as a list of assets, document locations and emergency contacts

6. Conduct a long-term care and life insurance assessment: either a self-assessment or speak with an insurance professional.

7. Leave a lasting personal legacy for your friends and family, e.g., a letter or ethical will

A Christmas Gift from Congress

The status of the Federal Estate Tax (affectionately known to some as the “Death Tax”) has been in a state of uncertainty for the last several years. In 2009 the tax existed and included an exempt amount of $3.5 million, meaning if the total value of your estate was less than the tax exempt amount, you did not have to be concerned with the tax. On January 1, 2010 the estate tax was repealed and we have operated for an entire year without an estate tax. On January 1, 2011 the tax was scheduled to return to its 2001 levels, which would include an exempt amount of only $1 million.

Congress and the President prevented a return to the 2001 estate tax levels when the President signed new tax legislation on December 17, 2010. This law provides very generous provisions for taxpayers in relation to the estate tax and removes the applicability of the tax for most individuals. Some highlights include:

-The tax exempt amount is now $5 million per individual. This means that together a couple can pass $10 million to their beneficiaries without paying an estate tax.

-Where there will be an estate tax, the maximum rate is 35%.

-The tax exempt amount is now “portable.” Meaning, if a spouse dies and does not use all of his or her exemption, the surviving spouse can claim the remainder. Under the old law, a couple would need to use tax-free or credit shelter trusts as a part of their estate plans in order to take advantage of both tax-exempt amounts.

-The Estate Tax and the Gift Tax are once again “unified,” meaning the exemption amounts are the same. Even when the tax-exempt amount was $3.5 million, the exempt amount for lifetime gifts was capped at $1 million. The exempt amount for lifetime giving is now $5 million.

This new law provides an incredible benefit for families. One should note that these new provisions are set to expire in two years, so either Congress will make these changes permanent or we will be facing the same situation again in December 2012. In the meantime, it looks like we will have a very happy new year (at least from a tax perspective).

Happy Thanksgiving

The following text is from my bi-weekly newsletter. I thought it was important enough to share here. If you are interested in signing-up for the newsletter, you can do so at www.jackcarneylaw.com.

Many of us are spending the long holiday weekend with family and loved ones. We all take the time to travel, cook, shop and even pass through airport security scanners because we love our families and we want to spend time with them. Even though we would do a lot for our families, there are some issues we usually try to avoid, like discussing estate and elder care planning.

The Thanksgiving holiday provides a wonderful opportunity to reconnect with family members and ascertain their situation. When children visit parents, they may notice stacks of unpaid bills, an empty refrigerator, dents in the car, or other signs that their parents need some help. These clues may also indicate a need for some elder care planning. If a parent becomes unable to handle his or her affairs, a Durable Power of Attorney is a more cost-effective tool than a court created guardianship or conservatorship.

Children are not the only ones that may want to ask questions this holiday season. If a young couple has children and they do not have a Will, then they are not doing everything necessary to protect their minor children (such as naming a legal guardian and establishing a trust to protect financial assets). Grandparents have a unique opportunity to initiate these discussions to ensure that their grandchildren will be well protected.

Showing true love for our family often involves addressing uncomfortable issues. Ensuring that our family is legally protected in the event of death or disability is one of the best gifts we can give.

On that happy note, have a wonderful holiday season!

An Alternative to Litigation

The Better Business Bureau (BBB) is an excellent resource for individuals who have a complaint with a business. The BBB can be a viable alternative to litigation when it comes to complaints against the services of a business (I must admit I have used it myself). Before considering seeking legal action to address a complaint, you may want to first consider whether the BBB can provide a solution.