Powers of appointment

A power of appointment is a right given to someone in a legal document to direct the distribution of property. For example, if you leave assets in trust to your son you may give him the right to direct in his will where the assets in the trust you set up will be distributed on his death. The advantage of using a power of appointment is it will give your son the ability to designate where assets should be distributed with the benefit of perhaps decades of knowledge of how assets should be distributed (e.g., how his children have grown). If you grant a power of appointment you should also provide for a contingent appointment of where assets should be distributed in case your son in this example does not use the power (exercise it). Powers can be general (unlimited and broad) or limited (e.g., you son can only appoint where the assets will be distributed among his descendants). There are very important tax implications to whether a power is general (it will be taxed in your son's estate if he can appoint it to his estate, creditors or creditors of his estate), and it will not be taxed in his estate if it is limited so that he cannot appoint it to his creditors, his estate or to creditors of his estate.