Creating an estate plan often involves a certain amount of looking into the future. Estate planners often wish they could give their clients a crystal ball to help them predict their family’s future emotional and financial situations when they pass away. After all, your lawyer could help you create a will or trust today, and you could live for another 50 years. A lot can change in 50 years.
Placing a power of appointment in your will or trust can help you introduce more flexibility into your estate plan. This power allows you to name someone as a “holder” of that power. This person will then have the authority to decide where money or property will be directed when you die. This is especially useful when circumstances have drastically changed after you have made your last will. At the Law Office of Andrew M. Lamkin, P.C., we help people craft cutting-edge solutions to age-old problems, just like this one. Read on to find out more about the uses of powers of appointment and how to future-proof your will or trust. If you have any questions, don’t hesitate to contact us.
What Is a Power of Appointment?
A power of appointment gives the appointed person the power to dispose of property. The power can be as broad or limited as the creator desires. A power of appointment can also be presently exercisable or postponed until a specified event occurs or a condition is met.
Under New York law, a power of appointment must be in writing. The holder’s powers can be broad or explicitly constrained.
What a Power of Appointment Is Not
Powers of appointment should not be confused with powers of attorney. A power of attorney appoints another person to act for you. A person can also create a durable power of attorney, which normally only comes into effect if a person is incapable of making their own decisions.
If you are unsure about what kinds of powers you are granting to whom in your estate planning instruments, speak with your estate planning attorney. The Law Office of Andrew M. Lamkin, P.C. can help you understand the differences between these documents and work with you to put the right solutions in place for your estate.
What Are The Types of Powers of Appointment?
A power of appointment can be exercised at the time it is made, or the holder’s ability to exercise the power can be postponed and activated later if some future condition is met. The power of appointment can also be general and broad, or it can be limited by the person granting the power.
General Power of Appointment
A general power of appointment gives the holder the right to redirect property to anyone they want. This means they can direct the estate property to other beneficiaries, including themself, their own children, or charities they like. The law does not place limits on how or where the holder of a general power of appointment can direct the assets of the estate.
Special Power of Appointment
A special power of appointment cannot be exercised in the holder’s favor. This generally means the holder has the power to direct the estate property to anyone other than themself, their family, their creditors, or the creditors of their own estate. However, a special power of appointment can also limit the holder to redirecting the estate assets to only a certain group and only under certain circumstances. For example, the group could be limited to the testator’s grandchildren or to a defined list of charities. A special power of appointment can also be used to allow the holder to redirect assets to themself only if the assets are used for the holder’s health, education, support, and maintenance.
Power of Appointment By Will
Granting the power of appointment in a will is the most common way a power of appointment is given. The appointment is considered to be created on the day of the testator’s death. Typically, a person creating a power of appointment grants the power to a trusted family member or friend.
As mentioned above, a power of appointment must be made in writing and should be specific about the scope of its powers. Speak with both a lawyer and an accountant to help you decide what type of power of appointment is right for you. The Law Office of Andrew M. Lamkin, P.C. can discuss your options with you and help you understand how you can use a power of appointment in your estate plan.
Uses of Powers of Appointment
Most powers of appointment are granted in wills and allow a holder to modify the bequests given to a small class of beneficiaries. Ideally, the holder does this by considering any events that occurred after the testator’s death. Usually, a power of appointment will limit the holder’s power of gifting to only the immediate descendants of the testator, such as children and grandchildren. For example, the instrument granting power to the holder can specify that the holder of the power can adjust what goes to the testator’s children or grandchildren. The grantor of the power of appointment can also limit the amount of change a holder is allowed to make. For instance, the will may specify that the holder is only permitted to modify half of a child’s share and 75% of a grandchild’s share.
How the Law Office of Andrew M. Lamkin, P.C. Can Help
Attorney Andrew Lamkin works one-on-one with his clients to map out the best strategy for their unique situations. Named to the “Top 40 Under 40” list by The National Trial Lawyers, Andrew excels at protecting his client’s interests in and out of the courtroom. When it comes to estate planning, you need an attorney who knows how to make all the pieces fit into a seamless whole. Andrew will take the time to get to know you so that you can choose the estate planning tools that are right for you and your family. The Law Office of Andrew M. Lamkin, P.C, is here to be your trusted planning partner and advocate. Contact us today for a free consultation.
Andrew Lamkin is principal in the law firm of Andrew M. Lamkin, P.C., where he focuses his practice in the areas of elder law, estate planning and special needs planning, including Wills and Trusts, Medicaid planning, estate administration and residential real estate transactions. He is admitted to practice law in New York and New Jersey.
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