Pg 39 Flashcards
What is a taker in default with regard to a power of appointment?
This is the person that takes if the power is not exercised. I.e.: “Property goes to A to distribute to those he deems advisable, and if not, to B.“ This says what to do if A doesn’t exercise the power.
What is the relation back rule with regard to powers of appointment?
Exercise of a power of appointment is deemed to relate back to the donor, so the appointee takes directly from the donor.
The donee of a power of appointment has the general power to do what?
He can exercise the power in favor of himself, his estate, his creditors, or the creditors of his estate, as well as anyone else that fits in the class of permissible appointees the donor defines. The donee can also use the donor’s property to pay other people, himself, or his own debts.
What are the two different types of power of appointment?
- general powers: can be exercised in favor of the donee or anyone else
– special or limited non-general powers: cannot be exercised in favour of the donee, his estate, or his creditors
What does it mean for a power of appointment to say that general powers have owner equivalence?
The donee can make himself the owner of property by appointing the property to himself, so there is no difference between him and an outright owner, so the government looks at holders of general powers of appointment as owners with the idea that if you own it, you pay taxes on it
How does it work for creditors with regard to powers of appointment for General Powers?
Before creditors can attach property, it has to be a presently exercisable power. For general powers, the donee can exercise the power in favor of himself at any time, so as long as the power is presently exercisable, and not reserved to be exercised at some point in the future such as when the donee turns 18, then creditors can reach that property.
What is a special or limited non-general power of appointment?
The pool of permissible appointees doesn’t include the donee, his estate, or his creditors. I.e.: “Tony can give property to anyone on the planet except himself, his estate, or his creditors.“
Do special or limited non-general powers of appointment have owner equivalence?
No, because the donee has no ability to make himself the recipient of the property, so he is not thought of as the owner of the property, and he does not have to pay taxes on it
Can the creditors of a donee reach special or limited powers of appointment property?
No, because he cannot enjoy the property, so creditors cannot attach it
Is this a general power or a special/limited power of appointment? “At my death my wife will hold all of my assets and may determine which of my descendants should get them.“
This is a special or limited non-general power because the wife only has power to appoint from the descendants, which doesn’t include her. So she doesn’t have to pay taxes because she is not the owner. Her creditors also cannot reach that property
What is a power of attorney?
This is an agency relationship or an agent gets written authorization to act on behalf of a principal.
What are the parties involved in a power of attorney?
- principal: person granting the power
– attorney in fact: person acting for the principal
In a power of attorney situation, does the principle lose his own power to act?
No, he just allows someone else to use that power too
Who all can be a principal with regard to power of attorney?
Any natural person with the power to contract [competent adult]
Who all can be an attorney in fact with regard to power of attorney?
Any natural person that is competent to contract