Also known as: property subject to powers · property subject to a power · appointive property
Written by attorneys · grounded in primary & secondary sources — see below
Property or a property interest over which a power of appointment has been created. The donee may designate recipients of beneficial ownership interests in the property or further powers over it. The property is distinct from any property the donee owns outright.
Paige Porter's late husband placed downtown retail units in trust and gave her a testamentary power to appoint them among family members or her estate. At her death Paige's probate estate held only modest personal property. Creditors of her business claimed the units as property subject to the power because the power reached her estate. The court treated the units as reachable to satisfy the claims once the probate assets proved insufficient.
Grant transferred future profits from a mixed-use project into an irrevocable trust. The instrument gave Xavier authority to allocate the profit shares among East Builders and Vanessa. Xavier delivered a notarized directive directing the trustee to assign shares to those two parties. The profit shares constituted property subject to the power and passed according to the directive rather than as Xavier's own assets.
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Property subject to the power is the appointive property over which the donee holds only a power of appointment. It is treated separately from any assets the donee owns in fee simple. Creditors and takers in default look to the terms of the power rather than treating the property as part of the donee's personal estate.
Supporting sources
The property passes to the takers in default named in the gift-in-default clause. If no such clause exists, the property may pass under an implied gift to the permissible appointees or revert to the donor or the donor's successors. The outcome turns on the creating instrument and the applicable default rules.
Supporting sources
Yes. When the donee's probate estate is insufficient, creditors may reach property subject to a general testamentary power created by someone other than the donee to the same extent as if the donee had owned the property. The rule prevents the donee from shielding reachable assets through an unexercised power.
Supporting sources