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power of appointment

Last modified: Thu Feb 23 16:37:37 2006

In general, the power to dispose of a Trust property, that is, to confer it on someone free of the trust. Power of appointment may be granted to a Trustee, but it doesn't have to be. For example, a person may create a trust in his will that benefits the spouse for life, with the spouse having a power of appointment to benefit the children.

A person granted a power of appointment is often referred to as the `donee' of that power, frequently shortened (confusingly) to just `donee' on its own. A power of appointment is a type of ownership right, but with specific limitations. For example, it isn't unusual to grant someone a power to appoint in his will.

Powers of appointment can be classified approximately into `general', `special' and `hybrid' (or `intermediate'), according to the class of objects for whose benefit the power may be exercised.

In general, the donee of a power of appointment is not obliged to exercise it, unless the TrustInstrument so declares; a power whose exercise is not mandated by a trust is often called a MerePower. However, a power may be associated with a strong expectation of exercise. Where there is an expectation that the power be exercised, it is referred to as a `PowerInTheNatureOfATrust'. Powers held by trustees (PowerVirtuteOfficii) will usually be associated with some Fiduciary obligations, and the trustees will therefore be obliged at least to consider exercising the power.

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