Do YOU know if you have a power of appointment?

Many times for flexiblity and for tax planning a decedent may, in a continuing trust document, give a beneficiary either a limited or general power of appointment. For example, at my death I create a trust for my husband, Bob. At Bob’s death I give him a power of appointment over the trust assets which must be exercised in HIS will to give the assets to certain charities. In default of the exercise (Bob doesn’t exercise such a power in HIS will), then the assets will be distributed to my family. If Bob does NOT actually draft and exercise the power in HIS will, then the charities lose and my family would inherit the assets.

In a recent case, Cessac v. Stevens, 2013 WL 6097315, the intended beneficiary of the decedent’s estate lost because the decedent did not properly exercise her power of appointment. Carefully review your clients’ trust and if a client has a power, then specifically discuss such a power and whether that power should be exercised. If so, be sure that the power is exercised in the manner as required in the document.

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