What do I do with my Power of Appointment?

If you have been given a power of appointment in a will or trust, you may have questions about what you are entitled to do with that power. Most often powers of appointment are granted in a will or trust.

 

There are different types of powers of appointment. Most are created in a will or trust and allow the powerholder – the person who will appoint the property – to choose certain people to receive real or personal property. There are usually limits on how and to whom the powerholder can appoint the property.

 

A general power of appointment is more broad and allows the powerholder to distribute property to himself or his estate. A special power of appointment prohibits the creditor from distributing property to himself or his estate and usually further limits the class of persons who can receive appointed property to certain individuals or charities. A powerholder may choose to do nothing with the power and leave the property in the trust or estate.

 

While a general power of appointment might seem preferable, creditors of the powerholder who has exercised the power may be able to reach property that is subject to a power of appointment. Because of creditors’ access to the property, many individuals choose to give their powerholders specific powers.

 

Depending on the type of power and property involved, you may wish to exercise your power and give a gift to a charity or in turn create a trust for your family members