Powers of Appointment

Question 1

Powers of appointment

Answer 1

A person writing a will or trust can give his or her beneficiares a power of appointment, which enables the beneficiary to designate who will receive specific trust or estate property.

Question 2

How can the power be exercised?

Answer 2

If a donee appoints trust assets outright, then the donee can also create more limited interests unless the donor intended otherwise.

Question 3

What are the two types of the power of appointment?

Answer 3

General appointment and special power of appointment

Question 4

What is the general power of appointment?

Answer 4

The class of people that the donee can exercise a power of appointment in favor is unlimited. (you can distribute the assets to anyone)

Question 5

What is the special or limited power of appointment?

Answer 5

the class of people that the donee can exercise it in favor of is limited. Appointments to impermissible appointees are invalid.

Question 6

Substantial Compliance Rule

Answer 6

The UPC adopts a “substantial compliance” rule which says that if it could be shown
that the powerholder had knowledge of and intended to exercise a power, a blanket exercise clause would be sufficient unless it could be shown that the donor had a
material purpose in insisting on the specific-reference requirement.

Question 7

What if a power is not properly exercised?

Answer 7

Property will go to the grantor’s estate and pass to whomever the gave it to in the event of default appointment.

Question 8

What if the trust does not identify a default appointment?

Answer 8

the assets subject to a
special power will pass to the permissible appointees of the power who are living when the
power lapses if (1) the allowable appointees are identifiable and (2) the donor of the power
has not required that the allowable appointees receive the assets only if the donee decides
to appoint them. If these requirements are not met, these assets revert to the donor’s
estate.