A power of appointment is normally used in written instruments such as a last will and testament, a deed or a trust wherein a person would appoint someone to decide how to dispose or distribute a certain property such as cars, household items and income from stocks. There are two types of a power of appointment, the General and the Special power of appointment.
The General power of appointment allows a person to appoint anyone including himself to distribute the properties in whichever way he wants. This power is distinct to federal estate tax. This power treats the holder as the owner of the property and therefore taxed for trust income. The general power of appointment is in favor of the power holder, his creditors, his estate and the creditors of his estate. There is no restriction as to who will be the beneficiaries in the general power of appointment. For example, if the writer of the will appoints his wife to distribute his property as the wife sees fit, then the wife is allowed to dispose the property to anyone including herself. The special power of appointment also called as the limited power of appointment however is limited to what is stated in the will or trust. The appointed is not allowed to include himself as a beneficiary, instead is allowed to distribute a certain property to the specified people stated in the will. For example, if the special power of appointment is given to the wife to distribute a property only to the donors’ five children, then the wife shall divide the property in ways she would consider to the children only.