mandatory power of appointment

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If a power is mandatory, then there is a duty to exercise it. A mandatory power of appointment is a power of appointment, or the right to appoint beneficiaries of property, that must be exercised by the donee. A mandatory power of appointment can be contrasted with a discretionary power of appointment where the donee can choose whether to exercise the power or not. If the power holder fails to exercise the mandatory power of appointment, the court must step in and execute the power by distributing all of the property in favor of the persons in whose favor the power may have been exercised.

Traditionally, this means that the court must be able to identify everyone who fits the description of the class of people identified as the objects of the power so that it is able to execute the power of appointment. Thus, the validity of such a power is subject to the same standard of definite beneficiaries as the standard given to the validity of a trust. If the identities of the beneficiaries cannot be ascertained, the power is invalid and so is the trust. However, some states uncouple the power and the trust so that if the trust fails for lack of definite beneficiaries, the power does not necessarily also fail.

[Last updated in July of 2023 by the Wex Definitions Team]