What It Takes to Exercise a Power of Appointment Through a Will
A power of appointment gives someone the authority to direct where certain property goes. There are two main types: general powers of appointment and limited powers of appointment. General powers of appointment let the holder direct property to themselves, their estate, or their creditors. Limited powers of appointment restrict who can receive the property.
In the absence of a requirement that a power of appointment be exercised by a reference or by an express or specific reference to that power, a general residuary clause in a will or a will making general disposition of all of the testator's property expresses an intention to exercise a power of appointment held by the testator only if the power is a general power and the creating instrument does not contain a gift if the power is not exercised or the testator's will manifests an intention to include the property subject to the power.
A.R.S. § 14-2608A general residuary clause that leaves "all my property" to someone does not automatically include property covered by a power of appointment. Two conditions must be satisfied. First, the power must be a general power. Second, the instrument that created the power must not include a default gift for when the power goes unexercised.
Why This Rule Protects Everyone Involved
This statute prevents accidental exercises of a power of appointment. Without this safeguard, a standard residuary clause could sweep up property the testator never intended to redirect. The person who created the power may have carefully chosen a default beneficiary.
For anyone who holds general powers of appointment or limited powers of appointment, the practical lesson is clear. If you want to exercise the power, say so directly in your will. Reference the power specifically. Name the property or trust it covers. Relying on a general "everything I own" clause may not be enough to carry out your wishes. A generic clause in someone else's will should not override careful planning by the person who created the power.