Among a trustee's numerous powers, the exercise of its power
of appointment is one it will most often be asked to consider
exercising. It is also the power that will come under the most
scrutiny from beneficiaries.
This article seeks to provide an overview of the key
considerations for trustees when deciding whether to exercise their
power of appointment, along with practical steps to ensure
compliance with the trust instrument.
When first considering the exercise of any power, it is
essential that the trustee review the settlement instrument (and
any variations) to confirm both the scope of the power and any
potential limitations. This will usually include checking:
- Who can exercise the power? Although it will usually be the
trustee, it is possible for the settlor to reserve the power of
appointment in certain circumstances.
