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Estate Planning Lingo – What Is A Power Of Appointment?
Getting Comfortable With Powers Of Appointment.
Does your will contain power of appointment? Does it waive powers of appointment? Do you know? Can you check? A power of appointment can provide flexibility for transferring property to legatees and heirs, usually children and grandchildren. A will or trust may allow beneficiaries powers of appointment, enabling them to direct where their share of the estate or trust goes at their death
The Powers Of Powers Of Appointment.
A power of appointment grants the recipient with authority to designate the distribution of property held in an estate or trust. There are two types of powers of appointment: a general power of appointment and a limited power of appointment. .A general power of appointment is a broad power that enables the beneficiary to allocate all or part of his or her share of the estate or trust without limitation. A limited power of appointment permits the beneficiary to allocate his or her share of the estate or trust among only certain potential recipients or classes of potential recipients, such as the descendants or charitable organizations, but not to the beneficiary, the beneficiary’s estate, or creditors of the beneficiary or the estate.
Looking For Flexibility?
A power of appointment provides flexibility by permitting the holder of the power to alter the distribution plan in a will or trust to accommodate changing family situations. The person holding the power of appointment has the opportunity to reevaluate distributions at the date of exercise to determine the best possible outcome for the assets.
Tax Consequences.
General powers of appointment and limited powers of appointment have very different tax consequences. The mere possession of a general power of appointment over trust property will cause the power holder to be subject to gift tax or estate tax on that property whether or not the general power of appointment is exercised. Conversely, the possession of a limited power of appointment does not subject the power holder to gift or estate tax. Which is which? It’s vital to use specific wording to meet tax code requirements. Need help or more info? Contact an experienced Maryland estate planning lawyer soon to learn more about how your estate planning documents can be tailored to take advantage of powers of appointment or other means to achieve your estate planning goals.
