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What are powers of appointment?

Once you begin to get deeply involved in the estate planning process in Woodland Hills, you may begin to hear the term "power of appointment" frequently used. What does this mean? Essentially, the power of appointment is the granting of authority to another to dispense or dispose of property. In the case of a will, for example, you as the testator may choose to grant the power of appointment to a family member, friend or colleague. That person then assumes the role of donee. A donee differs from a trustee in that he or she is not charged with managing property or investing assets, but rather simply dispensing them.

The California Probate Code recognizes two distinct types of powers of appointment. The most common is a general power of appointment. This allows whomever you grant it to exercise it as he or she sees fit, including to the benefit of him or herself, or his or her estate, creditors, or creditors of his or her estate. An example would be if you have an art collection, which you leave to a son or daughter to be utilized in any way he or she chooses.

The law goes on to state that any power of appointment not designated as “general” is classified as “special.” In contrast to general powers, a special power of appointment lists certain criteria for how property is to be handled. These criteria are usually established by some creating instrument (in this case, your will). In keeping with the previous example, a special power of appointment may mandate that your son or daughter use your art collection to fund your grandchildren’s education. The manner in which he or she liquidates those assets is typically left to his or her own discretion. 

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