PRIA, Government Policy, Made Personal

Summary

Counts an exercise or a release of a general power of appointment as a transfer of property by the person who holds the power. If the power was created on or before October 21, 1942, using the power is treated as a transfer, but simply failing to use it or fully giving it up is not treated as using it. If a pre‑1942 power was partly given up so it was no longer a general power, then later use of the remaining power is not treated as a general power if the partial give‑up happened before November 1, 1951, or if the holder could not legally give it up on October 21, 1942 and they partly gave it up within six months after that legal disability ended. For powers made after October 21, 1942, any exercise or release is treated as a transfer. Creating a new power from a later exercise is treated as a transfer to the extent the new power can delay ownership under local law. If a post‑1942 power ends during the holder’s life, that lapse is treated as a release only if the value involved is more than the greater of $5,000 or 5 percent of the relevant assets. A power in a will executed on or before October 21, 1942, counts as created on or before that date if the testator died before July 1, 1949 without republishing the will after October 21, 1942. A “general power of appointment” is a power to give the property to yourself, your estate, your creditors, or your estate’s creditors. It is not a general power if it only lets you use money for your health, education, support, or maintenance under a clear rule; if it was created on or before October 21, 1942 and can only be used together with another person; or, for powers made after October 21, 1942, if it can only be used with the creator of the power or only with someone who has a strong opposite interest. If a post‑1942 power is still a general power but can be used for several people including the holder, only a fractional part counts as a general power, found by dividing the property’s value by the number of such people.

Title 26, §2514

Internal Revenue Code, Source: USLM XML via OLRC

(a)Powers created on or before October 21, 1942

An exercise of a general power of appointment created on or before October 21, 1942, shall be deemed a transfer of property by the individual possessing such power; but the failure to exercise such a power or the complete release of such a power shall not be deemed an exercise thereof. If a general power of appointment created on or before October 21, 1942, has been partially released so that it is no longer a general power of appointment, the subsequent exercise of such power shall not be deemed to be the exercise of a general power of appointment if—

(1)such partial release occurred before November 1, 1951, or

(2)the donee of such power was under a legal disability to release such power on October 21, 1942, and such partial release occurred not later than six months after the termination of such legal disability.

(b)Powers created after October 21, 1942

The exercise or release of a general power of appointment created after October 21, 1942, shall be deemed a transfer of property by the individual possessing such power.

(c)Definition of general power of appointment

For purposes of this section, the term “general power of appointment” means a power which is exercisable in favor of the individual possessing the power (hereafter in this subsection referred to as the “possessor”), his estate, his creditors, or the creditors of his estate; except that—

(1)A power to consume, invade, or appropriate property for the benefit of the possessor which is limited by an ascertainable standard relating to the health, education, support, or maintenance of the possessor shall not be deemed a general power of appointment.

(2)A power of appointment created on or before October 21, 1942, which is exercisable by the possessor only in conjunction with another person shall not be deemed a general power of appointment.

(3)In the case of a power of appointment created after October 21, 1942, which is exercisable by the possessor only in conjunction with another person—

(A)if the power is not exercisable by the possessor except in conjunction with the creator of the power—such power shall not be deemed a general power of appointment;

(B)if the power is not exercisable by the possessor except in conjunction with a person having a substantial interest, in the property subject to the power, which is adverse to exercise of the power in favor of the possessor—such power shall not be deemed a general power of appointment. For the purposes of this subparagraph a person who, after the death of the possessor, may be possessed of a power of appointment (with respect to the property subject to the possessor’s power) which he may exercise in his own favor shall be deemed as having an interest in the property and such interest shall be deemed adverse to such exercise of the possessor’s power;

(C)if (after the application of subparagraphs (A) and (B)) the power is a general power of appointment and is exercisable in favor of such other person—such power shall be deemed a general power of appointment only in respect of a fractional part of the property subject to such power, such part to be determined by dividing the value of such property by the number of such persons (including the possessor) in favor of whom such power is exercisable.

For purposes of subparagraphs (B) and (C), a power shall be deemed to be exercisable in favor of a person if it is exercisable in favor of such person, his estate, his creditors, or the creditors of his estate.

(d)Creation of another power in certain cases

If a power of appointment created after October 21, 1942, is exercised by creating another power of appointment which, under the applicable local law, can be validly exercised so as to postpone the vesting of any estate or interest in the property which was subject to the first power, or suspend the absolute ownership or power of alienation of such property, for a period ascertainable without regard to the date of the creation of the first power, such exercise of the first power shall, to the extent of the property subject to the second power, be deemed a transfer of property by the individual possessing such power.

(e)Lapse of power

The lapse of a power of appointment created after October 21, 1942, during the life of the individual possessing the power shall be considered a release of such power. The rule of the preceding sentence shall apply with respect to the lapse of powers during any calendar year only to the extent that the property which could have been appointed by exercise of such lapsed powers exceeds in value the greater of the following amounts:

(1)$5,000, or

(2)5 percent of the aggregate value of the assets out of which, or the proceeds of which, the exercise of the lapsed powers could be satisfied.

(f)Date of creation of power

For purposes of this section a power of appointment created by a will executed on or before October 21, 1942, shall be considered a power created on or before such date if the person executing such will dies before July 1, 1949, without having republished such will, by codicil or otherwise, after October 21, 1942.

Notes & Related Subsidiaries

Editorial Notes

Amendments

1976—Subsec. (b). Pub. L. 94–455 struck out “A disclaimer or renunciation of such a power of appointment shall not be deemed a release of such power.”

Statutory Notes and Related Subsidiaries

Effective Date

of 1976 AmendmentAmendment by Pub. L. 94–455 applicable to transfers creating an interest in person disclaiming made after Dec. 31, 1976, see section 2009(e)(2) of Pub. L. 94–455, set out as a note under section 2518 of this title.

§2514 Powers of Appointment