Power of Appointment - General Power of Appointment

General Power of Appointment

Example: "I leave my video game collection to be distributed as my son Andrew sees fit."

A general power of appointment is defined for federal estate tax purposes in the Internal Revenue Code §2041. A general power of appointment is one which allows the holder of the power to appoint to himself, his estate, his creditors, or the creditors of his or her estate the right to have the beneficial use and enjoyment of certain property covered by the power of appointment. The holder of a general power of appointment is treated for estate tax purposes as if he or she is the owner of the property subject to the power, whether or not the power is exercised. Thus, the property which is subject to the power is includable in the power holder's estate for estate tax purposes.

A general power of appointment is a key element of a type of marital deduction tax law as prescribed in Internal Revenue Code §2056(b)(5). It is a trust that qualifies for the marital deduction, provided that the surviving spouse is given the income at least annually and the surviving spouse has a general power of appointment over the trust property remaining at his death.

Most general powers of appointment are exercisable under a will. The holder of the power refers to the document creating the power in his or her will and designates who among the permissible objects of the power should receive the property. The power could be exercised by creating further trusts.

If the power of appointment is not exercised, the default provision of the document that created the power takes over.