The parents of two children established an irrevocable trust. The trustee was instructed to divide the components of the trust equally into two shares for both children. The trustee was also given the discretion to distribute income to the son of the settlors and any of his descendants. The son was also given a power of appointment that he could exercise during his lifetime. The power of appointment gave the son the ability to appoint the remainder of the trust to any “issue” of the settlors. This also included the son. If the son does not exercise this power of appointment, the remainder is held in trust for any further beneficiaries.
In PLR 201229005, the IRS decided even though the son had the power to appoint the remainder of trust’s corpus to himself this was not a general power of appointment. Therefore, the remainder of the trust’s corpus will not be included in his gross estate upon his death.
See PLR 201229005 – Power of Appointment Is Not a General Power, CharitablePlanning.com, July 23, 2012.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
