Power of Appointment

Trust Terms

A legal authority in a will or trust that lets someone decide how certain property will be distributed to others.

A power of appointment is an authority granted in a will, trust, or other estate planning document. It allows one person (the "powerholder") to direct how certain property is distributed. The person who creates the power is the "donor." Those who may receive the property are called "appointees."

Types of Powers of Appointment

Powers of appointment come in two main forms:

General power of appointment: The powerholder can direct the property to anyone, including themselves.
The IRS treats the property as if the powerholder owns it. This creates major tax effects.
Limited (or special) power of appointment: The powerholder can only direct property to a restricted group.
The donor picks that group. This type offers flexibility without the tax impact.

How Powers of Appointment Work in Practice

A common use involves a surviving spouse with a limited power over trust assets. The spouse can adjust how property passes to children or grandchildren. They do not own the property outright. This flexibility is valuable in blended families.

Under A.R.S. § 14-2704, if the donor requires a specific reference, Arizona presumes that rule prevents accidental use. The powerholder must clearly identify the power when using it. Under A.R.S. § 14-2608, a clause distributing "all my property" does not automatically use a power of appointment.