Powers of Appointment

While you are alive, you can change anything about your trust document, including the beneficiaries. Although you are not available to make changes after your death, you can give someone else the power to change the beneficiaries after you are gone. This is called power of appointment. There are two types of powers of appointment: limited power of appointment and general power of appointment.

Limited Power of Appointment

A limited power of appointment is when you name someone in your trust document giving that person the power to direct the trust property among a limited number of persons. This is a very important provision you should consider putting in your trust.

The persons you name as beneficiaries in your trust document will become irrevocable when you are gone, unless you have given someone a limited or a general power of appointment to change the beneficiaries.

For example, assume you have a spouse and four children. You want your spouse to be the primary beneficiary of your trust after you are gone, and you want any property left in the trust after your spouse is gone to be distributed to your children. However, you may be reluctant to name your four children as equal beneficiaries. In that case, you can give your spouse a limited power of appointment to change the amount of property each of your four children will receive. Your spouse could live a long time after you are gone, and she may want to reward a child who is more helpful or even eliminate a child completely as a beneficiary.

The reason this power is called a limited power of appointment is because your spouse can only change the share each of your four children will receive. Your spouse can't remarry and leave all of your property to his new spouse because the new spouse is not within the limited class you established in your trust, namely, your four children.

General Power of Appointment

The second type of power allows the person to whom you give a general power of appointment to convey or appoint your property to anyone she chooses.

Before you give anyone, even your spouse, a general power of appointment over your trust property after you are gone, you should understand that this person could change all of your beneficiaries and give your property to someone you might not have chosen as a beneficiary.

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