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Power of Appointment Questions

What is a power of appointment?

A power of appointment is used in a will most of the times. According to this the creator of the will may choose a person who will have the right to distribute a certain amount of property in the will. There may be two kinds of powers of appointment, general power of appointment and special power of appointment. The person who has this power may not be the same as the trustee as his/her duty is only limited to distributing the property in the will and not managing it.

What is a special power of appointment?

A special power of appointment gives an individual the authority to distribute any property in the will to a specific group of people only. This group may not include the done, their estate, creditors or creditor’s of their estate. It could either be exclusive or non exclusive. If it is exclusive, the individual may be able to assign all the property to one or more members of the group of beneficiaries. If it is non exclusive, they may have to assign some property to each object. The individual with this authority may not be able to use this power to their benefit.

Can an individual remove a trustee if they give up the power of appointment?

An individual may not lose they power of removal if they were to give up their power of appointment. However, this individual may have to submit a request to the court if they want to remove a trustee. This individual may also have to give the court reasons as to why they want someone removed.

Can the actions of an individual be challenged if they use their power of appointment to wrongly distribute the assets of the trust among the beneficiaries?

If an individual does not follow the provisions given in the trust regarding distribution of assets and if the people concerned can prove this in court, they may challenge their actions.

Is it necessary for an individual to have a limited power of appointment on their spouse’s will in order to change the distribution of estate in the future?

Whether an individual needs to have limited power of appointment on their spouse’s will may depend on whether the total value of the estate will increase $1,000,000. If the individual expects the value to cross $1,000,000, then the individual may retain a limited power of appointment over their spouse’s estate in order to limit their federal estate tax exemptions to $1,000,000.

Can an individual decide whom he/she wants to give his/her share of a trust if he/she has a general power of appointment?

A general power of appointment may give an individual the authority to choose who would inherit his/her share of an estate if he/she dies before the trust is terminated. However, this may have to be mentioned in the individual’s last will and testament along with references to the power and the provision in the trust that gives him/her this power.

You may not always find all the information that you need about powers of appointment if you try to do your own research. In such situations, it may be helpful to consult an Expert and get as much information as you need.
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