Power of appointment traces its origins back to British common law. It is the legal authority to make another person the outright owner of the property left by a decedent. A donor gives the power to a donee so that person may choose the beneficiaries of their trust or will. Most commonly found in wills, the holder of the power of appointment has the ability to divide up the testator’s estate between the beneficiaries.
The donor can either grant the donee a general power of appointment, where the donee has full discretion as to who the property should be divided among, or a special power of appointment where the list of potential beneficiaries is subject to a set of limitations. In the event a donee chooses not to exercise their power of appointment, the property will be distributed to the takers in default.
[Last updated in June of 2022 by the Wex Definitions Team]