Powers of Appointment

What this guide covers

• The general versus nongeneral classification determines estate inclusion under IRC 2041, gift treatment under IRC 2514, basis adjustment under IRC 1014, GST transferor status, and creditor exposure.
• A general power is includible whether or not it is exercised, and its release during life is itself a transfer.
• The ascertainable standard, adverse party, and five-or-five exceptions are what make beneficiary-trustee and Crummey structures workable.
• Draft the class of permissible appointees, the exclusivity, the further-trust authority, the method of exercise, and the takers in default explicitly; most powers are never exercised, so the default gift is the real plan.
• The Delaware tax trap under IRC 2041(a)(3) can be sprung deliberately for basis or triggered inadvertently; its operation depends on the governing jurisdiction's perpetuities rule.
• A broad nongeneral testamentary power is the cheapest flexibility in estate planning and should be the default in long-duration trusts.

The full guide includes the detailed analysis, worked examples, statutory citations, and related resources below.