Powers of Appointment

A power of appointment allows a person (the donee) to decide who will receive certain property. A general power lets the donee give the property to themselves, their estate, or their creditors, while a special power restricts the donee to appointing the property to a specific group of people. If the donee does not exercise a special power, the property goes to those designated as takers in default or back to the original donor's estate.

Jane has a special power of appointment over a trust that allows her to distribute the assets only to her children. If Jane chooses not to exercise this power, the assets will go to her children as takers in default. However, if she had a general power, she could have also appointed the assets to herself or her creditors. In this case, the outcome is that the assets go to her children.

General powers are broad; special powers are narrow – know who gets what!

Exams often confuse students by mixing up general and special powers, leading them to misidentify the beneficiaries or the outcome of unexercised powers. Watch for language that suggests limitations on the donee's choices.

Questions typically present a scenario where a donee has a power of appointment and ask about the distribution of property if the power is exercised or not. Look for details about the type of power to determine the correct beneficiaries.