What does power of appointment mean
A power of appointment is where the person writing the will (testator) gives the right to dispose of their property on their death, to a nominated individual– thus providing the individual with power of appointment. The term power of appointment is commonly used in the law of wills and is normally always given to a selected person by a testator to distribute the estate of a will after the testator dies. It is advised to seek professional advice when writing a will and giving power of appointment to a person.
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Power of appointment explained
A power of appointment, as mentioned, is given to a nominated person, which will thus entitle the appointee to transfer the property of the will once the testator dies.
There are two main forms of power of appointment, namely; general power of appointment and special powers of appointment. For general power of appointment the individual is regarded for estate tax purposes to be the owner of the property subject to the power. Almost all general powers of appointment are exercisable in a will and the individual holding the general power of appointment will decide who receives the wills property.
A special power of appointment varies to the general power of appointment in that it allows the holder to distribute the prescribed property among a specific group of people (not including done, creditors of the done or the donee’s estate). The holder of a special power of appointment will typically be told who must receive the property but it is up to the appointee to decide how much and what, should go to whom.
The power of appointment will be given to the nominated individual by the testator through a written instrument i.e. a will. The purpose of the power of appointment is to ensure ones property will be disposed of as they wish after their death and this is why many people choose a close relative or legal attorney to have the power of appointment.
General power of appointment means the holder has no restrictions placed on how they can distribute or dispose of the property and to whom, while special powers of appointment will typically have the nominated beneficiaries already outlined.
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