Powers of Appointment

Question 1

DEFINE:

• Donor
• Donee
• Power of Appointment

Answer 1

Donor = creator of the power of appointment

Donee = the person who is given the power to use

Power of Appointment = an authority created in (or reserved by) a donee that enables the donee to designate, w/in limits prescribed by the donor, the persons who shall take the donor’s property and the manner in which they take it.

NOTE: when a person reserves a power in herself, she is both the donor and the donee of the power

Question 2

Def: Takers in Default

Answer 2

the people who take the donor’s property if the donee fails to correctly exercise the power of appointment

Question 3

Purpose of Power of Appointment

Answer 3

Allows someone to look at facts in existence at a later date for distribution of property.

Question 4

Classification of Powers– General Power of Appointment

Answer 4

Donee can appoint to herself, her creditors, or her estate. It is as if she owned the property herself.

Question 5

Classification of Powers– Special Power of Appointment

Answer 5

• limited power of appointment
• donee CANNOT appoint to herself
• typically there is a limited class to whom the donee can appoint

Question 6

Classification of Powers– Presently Exercisable PoA

Answer 6

Donee can exercise it right now, in her lifetime, if she wants

Question 7

Classification of Powers– Testamentary PoA

Answer 7

Donee can appoint only by will

Question 8

Exercising a PoA via will

Answer 8

A general will provision (ex residuary clause, or “i leave all my prop to”) EXERCISES ALL POWERS OF ATTORNEY held by the donee UNLESS the donor called for a specific reference to the PoA in the donee’s will.

Question 9

What happens if a donee doesn’t exercise her power of appointment and there is no default taker?

Answer 9

property goes to the DONOR’s residuary beneficiaries or his intestate estate

Question 10

RULES RE: POWERS OF APPOINTMENT & ELECTIVE SHARE

Answer 10

1- If deceased spouse held a GENERAL PRESENTLY exercisable PoA –> T-Sub. Look to see who and when the property is appointed to and follow regular t-sub rules.

2- If the deceased spouse held a GENERAL TESTAMENTARY PoA –> NOT a T-Sub

3- if deceased spouse held a SPECIAL PoA –> NOT a T-Sub

Question 11

Can the DONEE’s creditors ever reach the DONOR’s property? If yes, when?

Answer 11

General Presently Exercisable PoA –> YES. Donee can reach the assets as if she owned them and so can her creditors

Special Presently Exercisable PoA –> No. She can never reach the assets so neither can her creditors

General TESTAMENTARY PoA –> No, EXCEPT IF: (i) donee was also the donor; OR (ii) donee exercises the power in favor of her estate