How does power of appointment function in estate planning?

On Behalf of | Jun 4, 2020 | Estate Planning |

The power of appointment is an aspect of estate planning that allows you to formally designate someone to oversee the delegation of your estate. While not required, your decision to entrust important decisions and tasks to someone you trust may provide you with peace of mind. 

When selecting someone to manage such responsibilities, you may benefit from discussing their duties beforehand so they can make a confident decision. 

Contingencies of power of appointment 

In some cases, the person you choose to be your power of appointment may not be an heir if you select a special power of appointment. You will clearly define which group of individuals you wish to receive your assets. Then, your power of appointment, a neutral third party, will oversee the dissemination of donations, gifts, and inheritances according to your wishes. Determining the type of power of appointment you wish to use may influence the effect of the role so understanding the differences may help you make the most applicable decisions. 

Selecting someone you trust 

According to Forbes, you do not want to choose just anyone to be in charge of your estate. Experts warn that if you do not carefully choose someone you trust and provide them with a full understanding of your expectations, having the power of appointment could backfire. If you choose the wrong person or are too flexible in allowing them to use their own discretion to make decisions about your estate, too much power may undermine your final wishes and change the trajectory of your estate plan. Guaranteeing that your decisions remain intact and honored requires careful attention when it is time to choose someone to oversee your estate.