6.4 Interpretation and Drafting Considerations

• Library: A Lawyer's Guide to Estate Planning: Fundamentals for the Legal Practitioner (ABA) (2018 Ed.)

6.4 Interpretation and Drafting Considerations

The exercise of a power of appointment can create questions of interpretation that must be considered. For example, does a typical residuary clause in a will exercise a power of appointment? The answer to this question will vary, depending on state law.

If under state law the residuary clause in the will does exercise the power of appointment, an inadvertent result may occur. A will that bequeaths the residue of the estate to someone other than those beneficiaries who receive the trust estate when the power of appointment is not exercised (the takers in default) will cause the trust estate to pass under the terms of the will. Thus, the intended beneficiaries—the takers in default—will not receive the trust estate.

Example: Mary dies and passes her estate into trust for the lifetime benefit of her husband, John, and grants him a limited testamentary power of appointment to direct the trust to anyone other than his estate or creditors. If the power of appointment is not...