General Power of Appointment
What Is a General Power of Appointment?
A general power of appointment is a legal authority granted to an individual that allows them to decide how certain assets will be distributed. Unlike a limited power of appointment, a general power allows the holder to appoint assets to themselves, their estate, their creditors, or any other beneficiary.
This broad authority provides significant flexibility in estate planning.
Why It Matters
General powers of appointment allow individuals to control how assets are distributed in the future, even if the assets were originally placed into a trust by someone else.
However, because of the broad authority it grants, this power can have tax and estate planning implications.
How a General Power of Appointment Works
A trust document or estate plan may grant a person the authority to distribute certain trust assets.
The person holding the power may choose to:
- distribute assets to specific beneficiaries
- include the assets in their own estate plan
- appoint the assets to themselves
This power may be exercised during life or through instructions in a will.
Example
A trust allows a beneficiary to direct where trust assets go after their death, including leaving them to their own heirs.
General Power of Appointment vs Limited Power of Appointment
- A general power of appointment allows assets to be appointed to almost anyone, including the holder.
- A limited power restricts the group of potential beneficiaries.
FAQs About General Powers of Appointment
Why do estate planners use powers of appointment?
They provide flexibility while preserving long-term planning goals.
Does a general power affect taxes?
Yes. Assets subject to a general power may be included in the holder’s estate for tax purposes.
Can the power holder change beneficiaries?
Yes, within the authority granted by the trust document.
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