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She has medical issues of her own that are cause for concern. They made their will 20 plus years ago and have never updated it. Can she can legally change it without getting in trouble?

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If it's your sister's POA, she can name whomever she wishes and she should be able to change it any time she wants. She wouldn't want her husband to have POA if he has AD. So, it's probably time to choose another person. An estate attorney can help her with that.
Carol
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Your sister can change her own POA at anytime as long as she has cognitive capacity. And, as Carol suggested above, she absolutely should do so if her husband has Alzheimer's, especially if there is no successor named.
However, understand this:
A Power of Attorney only operates with respect to financial and contractual matters.
If health matters are your concern (as they should be in addition to financial and contractual matters) what needs to be arranged for is a Health Care Surrogate (aka: Health Care Proxy, Health Care Power of Attorney). Sometimes this is incorporated in the Power of Attorney, sometimes it is not. So read the existing document carefully.
Particularly with the new HIPPA laws, it is extremely important that a Health Care Surrogate document be updated.
Love and Peace....
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Did she check to see if the living will document names a successor? Typically, a successor would be named when spouses are each other's POA as one can always die or be incapacitated before the other. If POA has already been invoked for him due to the Alzheimer's, then he is incapacitated and the named successor would kick in for her if necessary. If no successor is named, then there should be no problem with changing and/or naming a successor.
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