Also known as: testamentary powers of appointment · power of appointment by will
Written by attorneys — see sources below.
A power of appointment that the donee may exercise only by a provision in the donee's will. The donor creates the power to ensure the donee retains discretion until death. Exercise requires compliance with both the donor's formal requirements and applicable will formalities.
Thomas Thompson funded an irrevocable trust with his own assets and retained a general testamentary power of appointment over the corpus. He died survived by his spouse Tori Taylor. The property subject to the power is treated as owned by Thomas at death for purposes of Tori's elective share because Thomas was both donor and donee of the general testamentary power.
Tristan Thompson held a general testamentary power of appointment over family business assets in trust. He described his desired appointment to his attorney but never signed or executed any will or codicil. After his death the default takers receive the assets because no effective testamentary instrument exercised the power.
In 1930 a New York resident created a revocable trust that was amended in 1931. The trust directed income from the corpus to his wife for life. It also granted her a general power of appointment. In default of appointment half the corpus passed to the decedent's heirs and half to the wife's heirs. In 1951 the wife executed an instrument that purported to release the general power and convert it into a special power. The decedent died in 1957. His estate claimed a marital deduction for the widow's trust on the federal estate tax return. The Commissioner disallowed the deduction under section 2056(b)(5) of the 1954 Code and assessed a deficiency. The estate petitioned the Tax Court for redetermination. While that proceeding was pending the estate obtained a New York Supreme Court decree declaring the 1951 release a nullity. The Tax Court accepted the decree as controlling and allowed the deduction. A divided Second Circuit affirmed. The companion case involved the estate of a Connecticut decedent who died in 1958. His will directed payment of estate taxes without proration and created a residuary trust granting his wife a general testamentary power of appointment. The Commissioner disallowed part of the marital deduction. The executor then obtained a probate court order applying the state proration statute. The District Court refused to treat the probate decree as binding on federal tax questions. The Second Circuit agreed the decree was not conclusive. The two cases reached the Supreme Court after the Second Circuit panels reached differing conclusions on the effect of the state decrees. Certiorari was granted to resolve the conflict among the circuits.
View caseA testamentary power may be exercised only by will at the donee's death. A presently exercisable power may be exercised during life by deed or other lifetime instrument. The creating instrument controls the classification.
The appointive property passes to the donee or the donee's estate rather than reverting to the donor. Modern doctrine treats the general power as the functional equivalent of ownership for this purpose.
The majority rule holds that a residuary clause without specific reference to the power does not exercise it. The donor may impose a specific-reference requirement that must be satisfied for valid exercise.
Any inter vivos contract to exercise a testamentary power is void. The donor intends the donee to retain discretion until death, so an earlier contract would improperly convert the power into an inter vivos exercise.
…of his death. In July of 1958, the decedent executed a codicil to his will, the pertinent part of which gave his wife a general testamentary power of appointment over the corpus of the trust provided for her. This qualified it for the marital deduction as provided by the Internal Revenue Code of 1954, § 2056 (b) (5). In the federal estate tax return…