Powers of Appointment

When choosing which topics to write about here, the primary consideration is whether the topic has shown up on previous bar exams. So, although it's reasonable to not necessarily expect to see a topic like powers of appointment in a Wills essay, it's been there. 

Here's what to know:

A power of appointment is an authority granted by a person (known as the donor of the appointment) to another person (known as the donee of the appointment), enabling the donee to designate who should take the donor's property and the manner in which that property should be taken. Importantly, there are both general and special powers of appointment. General powers are exercisable in favor of those including the donee himself. A special power, on the other hand, is exercisable only in favor of a limited class of appointees which does not include the donee. 

Another distinction between powers of appointment deals with time. A presently exercisable power of appointment is one exercisable by the donee during the donee's lifetime. A testamentary power of appointment is one exercisable only by the donee's will.

Creditor issues may appear on an exam. Assume that a donee has a power of appointment (either presently exercisable or testamentary). The donee's own creditor can not reach the property that the donee has the power to appoint prior to the donee appointing that property. However, once the donee appoints the property to another person, creditors of the donee can reach the appointed property as if the donee were the owner of that property. There is one exception to note: if the donee of a general power of appointment is also the donor of the appointment then creditors can reach the property even before it has been appointed by the donee. This is to prevent fraud against the creditor on the part of the donee.

You might come across questions where there is a residuary clause in a will. In most states, a residuary clause by itself does not exercise any power of appointment held by the testator of that will. In other words, more specific language is required by the testator to exercise the testator's power of appointment. In a minority of states, a will's residuary clause does exercise a power of appointment held by the testator of the will but only if it's a general (rather than special) power of appointment. And even in that minority of states there are some exceptions to that rule.

Lastly, it's worth noting that absent a contrary provision in the instrument creating the power, the donee can appoint the property outright and can also appoint the property to a trustee of a trust (and so these powers can show up in Trusts essays as well). The donee of a testamentary power of appointment (special or general) cannot contract to make an appointment; that contract is deemed invalid.