Power of Appointment: Ensure Your Wishes Are Carried Out by the Right Person
Depending on your circumstances, a Power of Appointment may be the best way to distribute your estate to your heirs. You can appoint a “holder” who is responsible for carrying out the wishes stated in your will or trust. There are two types of appointments: a General Power of Appointment and a limited or Special Power of Appointment. The principal, or the one who is granting the Power of Appointment, may transfer each power to a donee or holder — usually the spouse, child or an unrelated party — through a will or living trust.

A General Power of Appointment is any power over the disposition of property exercisable in favor of the holder’s estate or creditors, or the creditors of his/ her estate. This includes all powers regardless of the nomenclature used in creating the powers and regardless of local property law connotation.

A Special Power of Appointment grants the broad powers to distribute wealth or estate of the owner – and that includes to themselves. For estate tax purposes, the IRS will conclude that having such a broad Power of Appointment is the same as owning the assets subject to the power of appointment. In other words, the IRS will collect estate taxes from the estate of the holder of this type of Power of Appointment. A Special Power of Appointment is limited, and does not include the holder of the Power of Appointment as a beneficiary.

While this can be a useful solution, it can also start a string of complications unless you have an attorney who you can trust and one who has enough experience in handling Power of Appointment issues.

To set up a Power of Appointment or conduct any other estate planning, contact us directly. We have the experience to advise you and carry out your wishes from start to finish.