power of appointment

Authority granted to one person by another to transfer property upon the death of the latter.

One under which holders have the right to dispose of the property in favor of: (1) themselves; (2) their estate; (3) their creditors; or (4) the creditors of their estate. A trust Grantor is treated as the owner and is therefore taxed on trust income if he or she has the power to control the beneficial enjoyment of the trust corpus or income, without the approval of an adverse party.

Right granted to a person acting as Trustee to appoint others to dispose of or distribute an Estate according to the terms of a will or a deed of trust. A general power of appointment authorizes the person receiving the property (called the donee) to sell or dispose of it without restriction; a limited power of appointment limits the distribution of the estate to named individuals.

A power or authority given by a donor to a donee to appoint the beneficiaries of the donor's property, or any interest therein, which is vested in a person other than the donee of the power. 136 Cal. Rptr. 807, 809. The power may be created by deed orwill, id., and it may be reserved by the donor for him or herself. The instrument creating the power delineates the extent to which the donee may choose the beneficiaries of the donor's property. Under a general power, the power may be exercised in favor of any person, including the donee. Under a special power, the power may be exercised only in favor of a limited group, not including the donee or his or her estate. Present day powers of appointments are more flexible in determining beneficiaries than if a disposition irrevocably named all takers, a flexibility that allows for unforeseen future events. For example, a father's will may give his daughter the power of appointment over the principal of a trust, with the result that the daughter can allocate the principal as needed when she exercises the power. Under a more inflexible procedure whereby the father names all the beneficiaries and the amount to which they are entitled, adjustments could not be made for differing needs. If the father wants to insure that only the daughter's children are the beneficiaries, he can so provide by giving a "special power of appointment" to the daughter. The instrument creating the power usually will include a provision disposing of the property if the power is not effectively exercised. Title to the property or interest passes directly from the donor of the power to the beneficiary; the donee is merely the conduit through which title passes, 92 S.E. 2d 503. Moreover, since a power of appointment does not constitute an estate or interest, it is termed a naked power. If in the same instrument creating the power of appointment the donee is granted a present or future interest in the property over which the power is to be exercised, the donee is said to have a power coupled with an interest. 227 P. 2d 670.

I.R.C. §2041 defines a general power of appointment for tax purposes (subject to exceptions) as "a power which is exercisable in favor of the decedent, his estate, his creditors, or the creditors of his estate. . . ." If that definition is met, the value of the underlying property is includable in the value of the decedent's taxable gross estate. Therefore, special powers of appointment are generally better from a tax viewpoint.

The Law of Wills, Trusts and Inheritance
Part of the common law series
Wills
Wills  · Legal history of wills
Joint wills and mutual wills  · Will contract
Codicils  · Holographic will  · Nuncupative will
Parts of a Will
Attestation clause  · Residuary clause
Incorporation by reference
Contesting a Will
Testamentary capacity  · Undue influence
Insane delusion  · Fraud
Problems of property disposition
Lapse and anti-lapse
Ademption  · Abatement
Acts of independent significance
Elective share  · Pretermitted heir
Trusts
The Law of Trusts
Generic Terms:
Express trust  · Constructive trust
Resulting trust
Common Types of Trust:
Bare trust  · Discretionary trust
Accumulation and Maintenance trust
Interest in Possession trust
Charitable trust  · Purpose trust
Incentive trust
Other Specific Types of Trust:
Protective trust  · Spendthrift trust
Life insurance trust  · Remainder trust
Life interest trust  · Reversionary interest trust
Honorary trust  · Asset-protection trust
Special needs trust: (general)/(U.S.)
Doctrines governing trusts
Pour-over will  · Cy-près doctrine
Other related topics
Living Wills (advance directives)
Totten trust
Inheritance
Intestacy  · Testator  · Probate
Power of appointment
Simultaneous death  · Slayer rule
Disclaimer of interest
Other areas of the Common Law
Contract law  · Tort law  · Property law
Criminal law  · Evidence

A power of appointment is a term most frequently used in the law of wills to describe the ability of the testator (the person writing the will) to select a person who will be given the authority to dispose of certain property under the will. Although any person can exercise this power at any time during their life, its use is rare outside of a will. The power is divided into two broad categories: general powers of appointment and Special powers of appointment. The holder of a power of appointment differs from the trustee of a trust in that the former has no obligation to manage the property for the generation of income, but need only distribute it.

General power of appointment

A general power of appointment allows the holder of the power to distribute the designated property over which the power may be exercised to anyone. For example, if a donor grants their attorney a general power of appointment over their furniture, the attorney will then be able to distribute the property to anyone, including the donor and the donor's creditors. If the recipient of the power refuses to distribute any property, then the designated property will pass to the donor's residuary estate, or if none has been established, by intestacy. The donor may avoid this by including a default provision directing the property (or the power of appointment over it) to someone else if the recipient of the power refuses to exercise it.

Special power of appointment

A special power of appointment allows the recipient to distribute the designated property among a specified group or class of people. For example, a testator might grant his brother the special power to distribute property among the testator's three children. The brother would then have the authority to choose which of the testator's children gets which property. Unlike a general power of appointment, the refusal of the appointed party to exercise a specific power of appointment causes the designated property to revert as a gift to the members of the group or class.

External links

• Powers of Attorney and Appointment
• In a power of appointment every word counts

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