Powers of Appointment Flashcards
Power of appointment
A power of appointment is the authority created in a person (donee) to designate, within the limits prescribed by the creator of the power (donor), the persons who will take certain property and the manner in which they will take it.
The objects of the power are those in whose favor a power is exercisable. Takers in default of appointment are the persons designated to take the property if the donee fails to effectively exercise his power.
General vs. Special power of appointment
A general POA is one exercisable in favor of the donee herself, her estate, her creditors, or the creditors of her estate.
A special POA is one that is exercisable in favor of a specified class of persons that does not include the donee, her estate, her creditors, or the creditors of her estate.
Presently exercisable vs. testamentary power
A presently exercisable power is one exercisable by the donee during her lifetime. A testamentary power is exercisable only by the donee’s will. Unless expressly limited to the donee’s lifetime, a presently exercisable power is also exercisable by the donee’s will.
Failure to exercise general power
If a donee fails to exercise a general power and there is no gift in default, the property passes to the donor’s heirs or residuary legatees.
Exclusive vs. nonexclusive special powers
A special power is exclusive if it may be exercised in favor of some objects of the power to the exclusion of others; i.e. the donee may appoint to some objects and not others, or may appoint unequal shares.
A special power is nonexclusive if it must be exercised in favor of all of the appointees. Special powers are presumed to be exclusive unless the donor expressly provides otherwise.
Implied gift in default of appointment
If the donee of a special power fails to exercise it and there is no gift in default of appointment, a gift to the objects of the power is implied.
Exercise by implication
If a donee purports to dispose of appointive property as if it were her own, or if a disposition cannot be given meaning unless the donee is treated as having exercised the power, the power will be deemed exercised by implication.
Scope of power
A donee may exercise a power by creating a trust for an object of the power rather than appointing the property outright.
There is a split of authority regarding whether a donee of a special power can grant an object of the power a broader special power than he has.
Because the donee can appoint the property outright, the better view is that he can create a broader special power.
Presently exercisable general powers
If it is certain that a presently exercisable general power will become exercisable or fail within the perpetuities period, it is valid.
The perpetuities period begins to run on interests created by the exercise of the power from the date of exercise; therefore, the interests created must vest or fail within 21 years after the death of a life in being on the date of exercise.
Gifts in default of a presently exercisable general power are rarely invalid; the perpetuities period begins to run only when the power ceases.
Special and testamentary powers
If a special or testamentary power may be exercised beyond the perpetuities period, which begins to run from the creation of the power, it is void. Thus, unless expressly limited to the perpetuities period, any special or testamentary power given to an unborn person is invalid.
