The IRS also found that, because the distribution committee members had substantial adverse interests to each other (i.e., they were trust beneficiaries and had the authority to pass distributions to one (or to the grantor) to the detriment of the other), they did not possess general powers of appointment
over the trust for purposes of [section]2514.
The children are given general powers of appointment
over their pro rata trust shares, but only upon the death of their mother.
Permissible Appointments Under General Powers of Appointment
Subject to the exceptions noted below, the income beneficiary would be deemed to hold a general power of appointment if she had the power to invade the trust corpus for the benefit of herself, her estate, her creditors, or the creditors of her estate (any one of the foregoing is sufficient).The following powers if possessed by the income beneficiary would not be deemed general powers of appointment
for purposes of IRC Section 2041:
(77) The "relation back" doctrine not only determines the inception of the time period in which trust interests must vest, but it also determines the inception of the time period in which non-general and testamentary general powers of appointment
must be exercised.
If, under the terms of the trust, the surviving spouse is given no special or general powers of appointment
except the right to receive trust income for life with the remainder to be paid to the couple's heirs, none of the trust's assets can be drawn into the surviving spouse's estate.
in defining presently exercisable general powers of appointment
held by the decedent.
So as not to confuse the agent in this regard, it might be a good idea to specifically state in the durable power of attorney that the power to exercise testamentary special and general powers of appointment
is one of those powers that the agent is expressly prohibited from exercising.
2041(a)(1) and 2514(a), the lapse or release of pre-1942 general powers of appointment
are not subject to estate or gift tax).
She was entitled to all the income and had lifetime and testamentary general powers of appointment
over the trust principal.
While general powers of appointment
may present valuation problems, the regulations are clear on the treatment of special powers of appointment with respect to the TPT credit.
The "tolling" of the disclaimer period when general powers of appointment
are involved provides great flexibility in tailoring dispositive transfers involving long-term trusts.