Understand the use and purpose of various types of powers of appointment.
Clients may be uncomfortable with the rigidity of an estate plan set in stone upon their passing. They may not realize they have options to provide some flexibility to account for changes in circumstances, dynamics, and unforeseen, but inevitable, tax law changes. This presentation will define and explain powers of appointment, the tax consequences for the various types of power of appointment, and the considerations and benefits of creating powers of appointment.
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Agenda
Overview: Terms and Definitions
- Definition of Powers of Appointment
- Can Be Exercised
- During Life (Intervivos),
- At Death (Testamentary),
- Or Both
- Typically Granted Under a Will or Trust
- Person Who Creates the Power Is the Donor or Grantor
- The Holder of the Power Is the Donee or Powerholder
- Possible Recipients of Appointed Property Are Permissible Appointees
- Recipients of Unappointed Property Are Takers-In-Default
Types of Powers and How They Are Exercised
- General
- Can Appoint to Self, Estate, Creditors, or Creditors of Their Estate
- Lifetime
- Testamentary
- Limited
- Cannot Appoint to Self, Estate, Creditors, or Creditors of Their Estate or Limited to an Ascertainable Standard
- Lifetime
- Testamentary
- Does Not Trigger Gift Tax or Reporting by Powerholder When Exercised
Tax Consequences of General Powers of Appointment
- Income Tax
- Treated as Owner for Income Tax Purposes
- Estate
- Pre1942 Powers
- Step up at Death
- Estate Tax Allocation
- Estate Tax Clause in Will and Right of Recovery
- GSTT
- Powerholder Becomes Transferor
Why a Power of Appointment Should Be Considered, but Carefully
- Drafting Considerations
- Limited or General
- Limited Power Language Must State Powerholder Cannot Exercise in Favor of Self, Estate, or Creditors
- Flexibility and Family Dynamics
- Gpa to Non-Skip Beneficiary of Non-Exempt Trust (to Avoid GST Trigger Event)
- Powerholder Can Disclaim
- Decanting
Successes and Misses
- Situations or Examples of Powers Gone Right and Wrong
- Inadvertent Exercise
- General Waiver of Right of Recovery (ยง2207) Shifts Burden of Tax to Residuary Benes
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OnDemand Course
This course was last revised on August 2, 2023.
Call 1-866-352-9540 for further credit information.
- AK CLE 1.0
- Alaska attorneys may receive 1.0 hours of continuing legal education for completing this program. Please contact the Alaska Bar Association or go to www.alaskabar.org for details regarding reciprocity with other states.
- AL CLE 1.1
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- AR CLE 1.0
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- Arizona CLE 1.0
- The Arizona State Bar does not pre-approve or pre-certify MCLE programs. However, records of this program and attendance will be maintained by Lorman Education Services for auditing purposes. This activity may qualify for up to 1.0 hours toward your annual CLE requirement for the State Bar of Arizona.
- CA MCLE 1.0
- Lorman Education Services is a State Bar of California approved MCLE sponsor and this course qualifies for 1.0 CLE hours of participatory credit.
- CT CLE 1.0
- Neither the Connecticut Judicial Branch nor the Commission on Minimum Continuing Legal Education approve or accredit CLE providers or activities. This course has been approved for CLE credit in jurisdictions aside from CT and therefore it automatically meets the content and delivery requirements in Connecticut. Credit is based on a 60 minute credit hour and shall be awarded as follows: 1.0 CLE credit(s).
- GA CLE 1.0
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- HI CLE 1.0
- This program was approved by the Hawaii State Board of Continuing Legal Education for 1.0 CLE credit hours.
- IL CLE 1.0
- This course was approved for a total of 1.0 hours of MCLE Credit by the Illinois MCLE Board.
- MO CLE 1.3
- This course qualifies for self-study CLE credit in Missouri.
- ND CLE 1.0
- North Dakota CLE policy does not allow for pre-approval of any self-study courses. This course may qualify for up to 1.0 hours of CLE credit.
- NH MCLE 1.1
- NH MCLE does not approve or accredit CLE activities for the NH Minimum CLE requirement. Lorman Education Services believes this Ondemand course meets the requirement of NH Supreme Court Rule 53 and may qualify for CLE credit(s). Program Length: 63 Minutes.
- NM CLE 1.0
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- NV CLE 1.0
- This program has been approved by the Nevada Board of Continuing Legal Education for 1.0 CLE hours.
- NY CLE 1.0 including Areas of Professional Practice 1
- This course has been approved in accordance with the requirements of the New York Continuing Legal Education Board for up to a maximum of 1.0 credit hours in the area(s) of Areas of Professional Practice for 1.00 hour. Each hour may be counted only as satisfying one category of credit. Duplicate credit for the same hour of instruction is not permitted. This course qualifies for both established and newly admitted attorneys. Lorman Education- Noggin Guru, Inc. has a financial hardship guideline. Please contact customer service at 1.866.352.9539 for instructions on how to apply.
- PA CLE 1.0
- This Distance Learning program has been approved by the Pennsylvania Continuing Legal Education Board for 1.0 hours of substantive law, practice and procedure CLE credit.
- RI CLE 1.0
- This program has been approved by the Rhode Island Mandatory Continuing Legal Education Commission for 1.0 hours of CLE credit.
- VT CLE 1.0
- This self-study program has been approved by the Mandatory Continuing Legal Education Board of Vermont for 1.0 hour(s) of CLE credit. Please note: Attorneys may only claim 12 credits per compliance period in this format. This course is considered "Non-Moderated Programming without Interactivity".
- WA CLE 1.0
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- This program has been approved by the West Virginia State Bar MCLE Commission for 1.3 MCLE hours.
To earn each credit Lorman offers through the OnDemand learning platform, you need to watch 100% of the program. Also, for certain credits you will need to fulfill additional requirements which will be displayed on the "credits" tab when viewing the course.
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Why Lorman?
Over 37 years and 1.4 million customers worth of experience providing continuing education. Our passion is providing you world-class training to help you succeed in business and as a professional.
Faculty
Lauren K. Drury, Esq.
The Washington Trust Company
- Vice President, Chief Fiduciary Officer
- Estate planning, estate administration, and trust administration
- Co-editor of A Practical Guide to Estate Planning in Rhode Island (2022)
- Member of the Rhode Island Bar, Federal District Court Bar, Estate Planning Council of Rhode Island
- J.D. degree, Case Western Reserve School of Law; B.A. degree, Muhlenberg College
- Can be contacted at [email protected] and 401-348-1300
Alison R. Scholle
The Washington Trust Company
- Vice President, Wealth Management Tax Manager
- Estate, gift, transfer, and fiduciary income tax
- Enrolled Agent
- Over 20 years of high-volume estate, gift, transfer, and trust tax preparation
- Accounting A.S., Community College of Rhode Island
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