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Power of Appointment

Power of Appointment

A power of appointment is the power reserved to someone to do do something with the property in an estate. For example a power of appointment in a trust reserves to the grantor the right to change the beneficiaries to different beneficiaries. Thus, when exercised, the power of appointment gifts property to a different person than originally named in the trust.

Powers of appointment also change the trustees or other parties with authority in an estate plan. These powers often assist the grantor of the trust in changing circumstances without the need to redraft or revoke and rewrite the trust.

General Powers Vs. Special Powers

This page covers special general powers of appointment and not special powers. Special powers of appointment limit the powers of appointment possessed by the appointee. A discussion on special powers may be found here.

General powers of appointment are broad and exercisable in favor of virtually anyone. For example, when Bob’s son Fred spends the last ten years of Bob’s life caring for him, Bob exercises his power of appointment to give Fred an extra 10% of the estate. If Bob’s trust contained a provision for a power of appointment, he retained the right to change who received from the estate when he died. Common reasons for special powers of appointment include tax or asset protection planning. These special powers restrict the appointment away from certain groups or individuals such as immediate family members, employees, and others over whom the grantor maintains influence.

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