The lapse of a Crummey demand power is treated as a release of a general power of appointment
to the extent that the lapsed withdrawal right exceeds the five-and-five rule.
The 76/77 rulings addressed whether any trust assets were includible in a deceased trustee's gross estate as being subject to a general power of appointment
(173) The withdrawal right still constitutes a general power of appointment
, however, and will potentially trigger estate tax inclusion issues if the withdrawal-right holder passes away while the withdrawal right still persists.
New York's current statute as existing, and Restatement section 17.3(a), essentially rely on the main tax definition for a general power of appointment
. (98) Specifically, Internal Revenue Code section 2041(b)(1) provides in part as follows:
A power exercisable in favor of either the holder or his estate is a general power of appointment
; it need not be exercisable in favor of both.
Delaware also specifically allows a trustee to grant a special or general power of appointment
to a beneficiary of the new trust.
In the past, a number of letter rulings have determined that a beneficiary who has the power to remove a trustee will be treated as holding any powers held by the trustee for purpose of determining whether the beneficiary holds a general power of appointment
. (3) However, for purposes of IRC Sections 2036 or 2038, the Service will no longer include trust property in a decedent grantor's estate where the grantor retains the right to replace the trustee but can replace the trustee with only an independent corporate trustee.4 More recently, the power to remove a trustee and replace the trustee with an independent corporate trustee was not treated as the retention of powers held by the trustee for purposes of IRC Section 2041.
(6) One type of marital deduction trust is also referred to as a "power of appointment" trust, in that the surviving spouse is given a general power of appointment
over the trust during lifetime or at death.
The type of marital deduction planning may vary (including an outright bequest to the surviving spouse, a general power of appointment
trust, a QTIP (qualified terminable interest property) trust, and a QDOT (qualified domestic trust).
In many states, such a general reference to powers of appointment is construed as being sufficient to include that property and, in some states, the residuary clause need not even refer to powers of appointment to exercise a general power of appointment
3) Property passing under a general power of appointment
exercised by the will.
To accomplish this, there could be a savings clause in which a non-skip beneficiary is given a testamentary general power of appointment
if a generation-skipping transfer would occur at the death of the non-skip beneficiary.