Powers of Appointment

Question 1

what is a power of appointment?

Answer 1

a power of appointment is the AUTHORITY created in a person (called the POWER HOLDER) to choose the individuals who shall take certain property and the manner in which they will take it

Question 2

who creates the power?? and what can they do??

Answer 2

the creator of a power (called the DONOR) may prescribe limits on the power

Question 3

can a power of appointment be transferred?

Answer 3

a power holder may NOT transfer a power of apponemtn

Question 4

when does a power of appointment lapse?

Answer 4

if a power holder dies without exercising or releasing a power, it lapses

Question 5

what are the people who may receive property from power holder called?

Answer 5

Those who may receive property from a power of appointment are called permissible appointees.

Question 6

what are ‘takers in default of appointment’?

Answer 6

Persons designated to take the property
if the power holder fails to effectively exercise the power are called takers in default of appointment.

Question 7

what are the 2 types of powers of appointment?

Answer 7

1) general power of appointemtn
2) special / non general power of appointment

Question 8

what is a general power of appointment?

Answer 8

A general power of appointment is one that is exercisable in favor of the power holder themselves, their estate, their creditors, or the creditors of their estate.

Question 9

what is a non general / special power of appointment?

Answer 9

A nongeneral power (sometimes called a special power) is one that is exercisable in favor of a SPECIFIED class of persons that does not include the power holder, their estate, their creditors, or the creditors of their estate.

Question 10

what types of powers are there?

Answer 10

1) presently exercisable power
2) testamentary power

Question 11

1) presently exercisable power

Answer 11

A presently exercisable power is one that is exercisable by the power holder during their lifetime

Unless expressly limited to the power holder’s lifetime, a presently exercisable power of appointment is also exercisable by the power holder’s will.

Question 12

2) testamentary power

Answer 12

A testamentary power is exercisable only by the power holder’s will.

Question 13

general powers of appointment - basics - how does the power holder act??

Answer 13

The power holder is acting as the donor’s agent in appointing the property;

thus, when the power holder EXERCISES the power, the appointee takes title directly from the donor (RELATION BACK).

A power of appointment is personal to the power holder, meaning they cannot delegate it or assign it.

Question 14

can creditors reach appointive assets??

Answer 14

**creditors cannot reach appointive assets unless power holder exercises power

Under the theory that the power holder does not own the appointive property, if the power holder does not exercise their general
power (whether presently exercisable or testamentary), their creditors cannot reach the property.

However, once the power holder exercises the power, their creditors can reach the appointive property as if the power holder were the owner, even if they appoint the property to another person.

Furthermore, if the power holder of a general power is also the donor, their creditors can reach the appointive assets whether or not the power is exercised.

Question 15

failure to exercise general power of appointment

Answer 15

If a power holder fails to exercise a general power and there is no gift in default of appointment, the property passes to the power holder if they are a (1) permissible appointee and (2) living.

If the power holder is an impermissible appointee or deceased, the property passes to the power holder’s ESTATE if the estate is a permissible appointee.

If not, the property reverts to the donor’s estate and passes to the donor’s heirs or residuary legatees.

Question 16

non-general powers of appointment (special)

Answer 16

non general power of appointment can either be
1) exclusionary non general power
2) non exclusionary nongeneral power

Question 17

1) exclusionary non general power

Answer 17

A nongeneral power is exclusionary if it may be exercised in favor of some permissible appointees to the exclusion of others;

in other words, the power holder can exclude some permissible appointees and can appoint unequal shares.

Nongeneral powers are presumed to be exclusionary unless the donor expressly provides otherwise.*

Question 18

2) non exclusionary nongeneral power

Answer 18

a non general power is non exclusionary if it must be exercised in favor of all of the permis-sible appointees.

Question 19

implied gift in default of appointment

Answer 19

If the power holder of a nongeneral power fails to exercise it and there is no express gift in default of appointment, a gift in default of appointment to the permissible appointees of the power is implied.

Question 20

Creditors Can Never Reach Appointive Assets Even If Power Exercised

Answer 20

With a nongeneral power of appointment, the power holder’s creditors CANNOT reach the property, even if the power holder exercises the power.

This is true even if the power holder of the nongeneral power is also the donor, unless the transfer was in fraud of the donor/ power holder’s creditors (or the initial gift in default of appointment is to the power holder or the power holder’s estate).

Question 21

EXERCISE of powers of appointment – any instrument??

Answer 21

Unless the donor directs otherwise, a power of appointment can be exercised by any instrument effective to transfer title to property.

Question 22

residuary clause exercise general testamentary power

Answer 22

A residuary clause includes any real or personal property over which the testator held a general power of appointment, unless a contrary intention appears in the will.

The statute does not apply to nongeneral testamentary powers of appointment.

Question 23

“Blanket” Exercise of Power Permissible

Answer 23

If a person holding a testamentary power of appointment executes a will that devises “all the rest, residue, and remainder of my property, including any property over which I may have a power of appointment,” this “blanket” exercise will be given effect UNLESS the donor called for appointment by an instrument that specifically refers to the power.

Question 24

Exercise by Implication

Answer 24

If a power holder purports to dispose of appointive property as if it were their own, or if a disposition cannot be given meaning unless the power holder is treated as having exercised the power, the power will be deemed exercised by implication UNLESS the donor called for appointment by a specific reference to the power.

Question 25

CONTRACTS TO APPOINT

Answer 25

Testamentary Powers—Contract to Appoint Invalid
The power holder of a testamentary power cannot contract to make an appointment.

To allow this would defeat the intention of the donor by, in effect, transforming a testamentary power into a presently exercisable power.

Question 26

Presently Exercisable Powers—Contract to Appoint Valid

Answer 26

The power holder of a presently exercisable power can contract to make an appointment, but cannot contract to confer a benefit on an impermissible appointee of a nongeneral power.