Description
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.
Date: 2023-08-02 Start Time: End Time:
Learning Objectives
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
• Pre-1942 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 (§2207) Shifts Burden of Tax to Residuary Benes
CLE (Please check the Detailed Credit Information page for states that have already been approved) ,Additional credit may be available upon request. Contact Lorman at 866-352-9540 for further information.
Lauren K. Drury, Esq.-The Washington Trust Company, Alison R. Scholle – The Washington Trust Company
