Limited Power of Appointment
What Is a Limited Power of Appointment?
A limited power of appointment is a legal authority granted to an individual allowing them to designate who will receive certain assets from a trust or estate. However, the authority is restricted to a specific group of beneficiaries identified in the trust or estate document.
This limited authority helps ensure the assets remain within a designated family or beneficiary group.
Why It Matters
Limited powers of appointment allow flexibility in estate planning while maintaining control over how assets are ultimately distributed. They allow a designated person to make future decisions about inheritance while respecting the original grantor’s intentions.
This structure can also provide adaptability as family circumstances change over time.
How Limited Power of Appointment Works
The trust document identifies a person who may exercise the power of appointment and defines the group of permissible recipients.
The designated person may choose beneficiaries within that group but cannot appoint assets to themselves, their creditors, or individuals outside the permitted group.
The power may be exercised during life or through a will.
Example
A trust allows a daughter to distribute trust assets among her children. She may decide which children receive the assets and in what proportions.
Limited Power of Appointment vs General Power of Appointment
- A limited power restricts the group of potential recipients.
- A general power allows broader authority, including the ability to appoint assets to oneself.
FAQs About Limited Powers of Appointment
Who can receive assets through a limited power of appointment?
Only individuals specified in the trust or estate document.
Why are limitations placed on this power?
To ensure the original grantor’s intentions are preserved.
Can a limited power be exercised through a will?
Yes, if the trust document permits it.
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