CLU - CFP Topics 53 - 73 Estate Planning: Power of Appointment

Question 1

Parties to a POA

Answer 1

donor, power holder, beneficiaries

Question 2

General Power of Appointment (GPA):

Holder of power can exercise power for:

Answer 2

• own benefit
• benefit of holder’s creditors, or
• holder’s estate

Question 3

Special Power of Appointment (SPA):

A SPA occurs when holder of a power of appointment cannot exercise it to benefit:

Answer 3

• self
• creditors
• estate

Question 4

Exception to SPA:
An exception is made if the holder of the power can benefit and it can be exercised in holder’s favor with the consent of the:

Answer 4

• grantor, or

- one having a substantial adverse interest in the property

Question 5

No tax ramification if the agreement providing the holder a GPA has:

Answer 5

• an ascertainable standard

- a “5 x 5” Power

Question 6

Consequences of a GPA:
If Holder of GPA:
- Makes a ___ to a beneficiary, taxable gift is made to that person
- Releases ___, it is deemed a gift as ___ goes to another
- ___ to exercise the power and the power lapses or terminates, it is a taxable gift
- ___ while holding the power, results in the value of the assets going into the ___

Answer 6

• transfer
• power, power
• fails
• dies

Question 7

Substance (holder having a power) is a GPA or SPA irrespective of what it is called:

Answer 7

• trustee
• personal representative
• agent