In planning his or her estate for distribution after death, a person might choose not to make specific bequests in his or her will. Instead, the person might create a power of appointment. This power, given by the deceased (donor), gives the designated person (donee) the ability to select who receives assets in the decedent’s estate. If it is a general power of appointment, the donee can select anyone, including him or herself, as a recipient with no restrictions. The donor could also specify, though, a special power of appointment, which restricts the donee to distribute assets to a select group of people or organizations. The donor also can create a timeline in which the assets are to be distributed. For example, the donor might say the assets are to be distributed immediately or cannot be distributed until 10 years after the death.
It is important to note that assets subject to the power of appointment pass directly to the donee first and then must be distributed to the recipients chosen. This means a donee’s creditors can access them. It also means if the donee dies before the assets are distributed, the assets are considered a part of the donee’s estate. The power does not continue past the donee’s death.
