Assets are often placed in a trust to protect those assets from the beneficiary’s creditors, potential divorce, substance abuse or gambling problems, or just the inability to manage money. While the trustee will control those assets, the beneficiary can be given the power to leave those assets to another at his or her death. This is called a “power of appointment” (POA). However, the legal requirements must be carefully complied with for such an exercise to be effective.
A recent California case addressed the use of a “power of appointment” in a trust and the requirements that would allow the trust beneficiary to exercise that power. Estate of Eimers. Powers of appointment are used in all states and can give a beneficiary of a trust the ability to leave trust assets to a person of the beneficiary’s choosing. This is done by having the trust document give the authority to the beneficiary to designate in the beneficiary’s last will and testament who will receive the trust assets upon the death of the beneficiary. Under the law of Mississippi and other states, the beneficiary’s will must expressly refer to the power of appointment in the trust for the exercise to be valid. The Eimers case in California found that the beneficiary’s handwritten will did not specifically refer to the power of appointment and, therefore, was ineffective to leave his trust assets to the couple named in his will.
Mississippi Code Section 91-8-813(b)(2)(D) states that a trustee of an irrevocable trust, within sixty (60) days after the acceptance and funding of a trust, shall notify a beneficiary who holds a power of appointment, that the trust has been established, and the notice must contain all of the information necessary for that person to understand they have the power and to determine whether or not to exercise that power of appointment.
A trust is an effective way to protect assets for the use of a beneficiary, and a power of attorney may be part of a trust to allow the beneficiary to have a say in who ultimately receives those assets. For help with trusts for children or adults, including persons with disabilities, contact us today at 601-987-3000.