Powers of Appointment: How Much Control Should Your Trust Beneficiary Have?

💡Powers of appointment allow trust beneficiaries to redirect or override the default distribution scheme set by the trust creator.

🔑There are different levels of control for powers of appointment, ranging from no power to nearly a general power of appointment.

👪Trust creators can give beneficiaries the ability to redistribute assets within the family or extend it to include spouses of family members.

💼Some trust creators may choose to give beneficiaries no power of appointment, relying on default distribution schemes.

💰Broad powers of appointment may trigger estate tax issues, and it's important to balance control with potential tax consequences.

What is a power of appointment in a trust?

—A power of appointment in a trust allows the beneficiary to redirect or override the default distribution scheme set by the trust creator.

Why would I give my trust beneficiary a power of appointment?

—Giving your trust beneficiary a power of appointment allows them to have some control over the distribution of trust assets and ensures assets are sent to the right place.

Can I limit the power of appointment to specific individuals?

—Yes, you can limit the power of appointment to specific individuals, such as descendants or spouses of family members.

What happens if I don't give my trust beneficiary a power of appointment?

—If you don't give your trust beneficiary a power of appointment, the distribution of trust assets will follow the default distribution scheme set by the trust creator.

Are there any tax implications with powers of appointment?

—Broad powers of appointment may trigger estate tax issues, so it's important to consider the potential tax consequences when deciding on the level of control to give to your beneficiary.

00:01In setting up a trust, you may consider how much power your trust beneficiary should have to redirect or override distribution decisions.

01:21Powers of appointment allow beneficiaries to modify the default distribution scheme set by the trust creator.

03:43Different levels of control can be given to trust beneficiaries, ranging from no power of appointment to nearly a general power of appointment.

04:13Trust creators may choose to limit the power of appointment to specific individuals within the family.

05:31Broad powers of appointment may have tax implications, and it's important to balance control with potential estate tax issues.