Powers of appointment are versatile estate planning tools that permit the donor and his or her family to modify or adapt an existing estate plan to meet the family’s changing economic and personal circumstances. Care must be taken to avoid certain tax disadvantages while harnessing their potential. A power of appointment may be described as a power over property granted by one, known as the donor or creator of the power, to another, known as the holder or donee of the power, which enables the donee to appoint or direct the payment of the subject property to one or more individuals or entities (typically charities), known as the appointees of the power. The power may be circumscribed so that it is more in the nature of the donor’s proxy, or expanded to be tantamount to outright ownership of the subject property by the donee.
The topic of powers of appointment is substantial and complex and this article is not intended to be exhaustive. It should serve as an overview of certain important aspects and as an introduction to the reader who is not so familiar with this area of the law.
Overview
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