Powers of Appointment Flashcards
Define power of appointment.
An authority created in (or reserved by) a donee enabling the donee to designate (within limits prescribed by the donor), the persons who shall take the donor’s property and the manner in which they shall take it.
Who are the takers in default?
The people specified in the will as default beneficiaries in the event the donee fails to exercise the power of attorney.
What does it mean to have a general power of appointment?
Donee can appoint herself, her creditors, or her estate. It is as if she owned the property herself.
What does it mean to have special powers of appointment?
Donee CANNOT appoint herself. Typically there is a limited class to whom donee can appoint (e.g. issue of my brother).
What does it mean to have a presently exercisable power of appointment?
Donee can exercise the power right now, in her lifetime - or maybe in an inter vivos trust.
What does it mean to have a testamentary power of appointment?
Donee can only exercise the power by will
Can a donee with a testamentary power of appointment exercise that power by stating “I leave all my property…”?
Yes - this is an exercise of the power of appointment.
Can’t if the donor called for a specific reference in the donee’s will?
If the donor calls for a specific reference in the donee’s will to exercise the power of appointment, will “I leave all my property…” suffice?
No - without specific reference to the power of appointment, the law will consider the power unexercised.
If a donee fails to exercise a general, presently exercisable power of appointment and there are no default takers - how is the property distributed?
The principal of trust property goes back to the donor’s estate - either to his residuary beneficiaries or if none, it will pass through intestacy.
What kind of power of appointment is a testamentary substitute?
A general, presently exercisable power - and no other type.
Can creditors reach the assets if debtor has a general presently exercisable power of appointment?
Yes - because the debtor can reach the assets as if she owned them, so can her creditors.
Can creditors reach the assets if a debtor has a special presently exercisable power of appointment?
No - because the appointment is limited to a special class, excluding the debtor - the creditors cannot reach it.
Can creditors reach the assets if a debtor has a testamentary power of appointment?
No - unless the power is general AND
- the donor and the donee are the same person.
(giving an income interest to herself)
(exercising the power in favor of her estate)
What is the second look doctrine?
In evaluating whether a power of appointment violates the RAP (if it’s a general or special testamentary power): fill in any of the blanks by looking at the facts at the time the donee exercises the power.
