April 30, 2020

Power of Appointment

Probate Code §610(f) defines a power of appointment as a "power that enables a powerholder acting in a nonfiduciary capacity to designate a recipient of an ownership interest in or another power of appointment over the appointive property."

A recent published appellate opinion addressed whether a surviving spouse could properly exercise a power of appointment for their own benefit involving the deceased spouse's property. 

Tubbs v. Berkowitz, (2018) ___ Cal. App. 5th __.

"In 2005, Berkowitz and his wife created the Trust of which they were trustees during their lifetimes. The Trust provided that, after the death of the first spouse, the trustee (the surviving spouse) was required to allocate the Trust's assets between the surviving spouse's trust and the Marital Trust." 

"The Marital Trust also provided the surviving spouse with a general power of appointment, which is the focus of this appeal. The relevant provision stated: "At any time during the surviving spouse's life, the trustee shall distribute all or any part of the trust, including accrued income and undistributed income, to such one or more persons and entities, including the surviving spouse or the surviving spouse's estate, and on such terms and conditions, outright, in trust, or by creating further powers of appointment, as the surviving spouse shall request by an acknowledged document that specifically refers to this power of appointment." The surviving spouse's trust included an identical provision." 

"In 2011, Berkowitz's wife passed away, requiring Berkowitz to allocate the Trust's assets as described above. In April 2017, Berkowitz filed a petition to confirm his proposed allocation of assets, among other things. After Tubbs filed objections to Berkowitz's petition, Berkowitz exercised his general power of appointment and appointed all assets in the Trust to himself, effectively divesting the contingent beneficiaries (which included Tubbs) of their right to distributions upon Berkowitz's death."

Ultimately, the trial court found that the exercise of the power of appointment was proper, since the trust expressly provided the surviving spouse with the ability to do so and the appellate court agreed.