Also known as: powers of withdrawal · withdrawal power · right of withdrawal
Written by attorneys · grounded in primary & secondary sources — see below
A presently exercisable general power of appointment held by a person other than the trustee. The power permits the holder to direct trust property to herself or to others without restriction by an ascertainable standard.
Penelope Price is the sole lifetime beneficiary of a trust holding shares in a technology company. The trust instrument permits her to demand any amount of principal at any time by written notice to the trustee. When Penelope directs the trustee to transfer half the shares to her personal brokerage account, the trustee must comply because her right meets the criteria for a power of withdrawal.
Phoebe Park holds a trust interest that allows her to withdraw four percent of the corpus once each year after she reaches age twenty-one. Because the right is presently exercisable in successive annual increments and is not conditioned on trustee consent or an ascertainable standard, her annual withdrawal authority qualifies as a power of withdrawal that creditors may reach.
Select any source to read its text and confirm it supports the definition.
The right qualifies when it is a presently exercisable general power of appointment that the beneficiary may exercise unilaterally. It must not be held by a trustee and limited by an ascertainable standard, nor conditioned on consent of a trustee or adverse party.
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Yes. A power exercisable only upon consent of the trustee falls within an express statutory exclusion and therefore does not constitute a power of withdrawal, regardless of whether the trustee also holds an adverse interest.
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When the required consent comes from a person whose own beneficial interest would be diminished by the withdrawal, the power is excluded from the definition of power of withdrawal even if the consent holder is not acting in a trustee capacity.
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During the period the power may be exercised, the holder is treated as the settlor of a revocable trust to the extent of the property subject to the power, allowing creditors to reach that property.
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Yes. A beneficiary who could have withdrawn the entire corpus and then returned the unused portion may instead make multiple partial exercises of the power without losing its character as a power of withdrawal.
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…e. , the death of the donee.” There is no case, so far as we have been able to find, which deals with a strictly limited power of withdrawal which can be exercised only over a period of years, and which cannot be used to destroy the entire estate until a number of years has elapsed. In the case before us, as we have shown, the…