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Power of Appointment

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When you give a gift to someone in trust, you get to decide who benefits from that gift after the initial beneficiary’s death, if there are still assets in the trust, but you do not have to. Another option is creating a power of appointment.

What is a Power of Appointment?

You can choose to allow the person you are leaving the gift to decide who should receive the remainder of their gift on their death. This is an example of a “power of appointment.” It allows you to let someone else designate the recipient(s) of your gift.  The document creating the power of appointment, typically a will or trust, determines how it must be exercised. It could be exercised by any signed writing, or it could be required to be included in the power holder’s will.

The power of appointment you create can be “general” or “limited.” Let’s assume you are leaving a gift to your child in trust. You can create a power of appointment for your child to decide where the remainder of the trust goes on their death. A general one would allow your child to leave the remainder of their trust to anyone they choose. This could include their spouse, their children or a charity. A limited one places conditions on who your child can leave the remainder to. It could require that your child leave the remainder to their children. The purpose of a power of appointment in that context would be to let your child determine the shares each of their children receives. Whether you make it limited or general, it gives the power holder some control.

What happens if it is not exercised?

However, a power of appointment does not need to be exercised. Therefore, you still need to decide what should happen the power holder does not exercise it. The remainder beneficiaries you select might be the other beneficiaries of your estate, but they do not need to be. It could be anyone you want. Or you could select whoever you think the power holder would choose if they did exercise it.

Should you create one?

Maybe. It really depends on your intention behind the gift you are making. A power of appointment allows you to give your beneficiary some additional ownership of their gift.

Of course, if you know that you want the remainder of your child’s trust to go to their children in equal shares on their death, you can and should do that. But note that you will be giving up some flexibility for your child to adapt to circumstances that might occur after your death.

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Robert B. Fleming

Attorney

Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman

Attorney

Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson

Attorney

Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

Famous people's wills

Matthew M. Mansour

Attorney

Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.