Power of Appointment

Parties involved with a power of appointment are:
"Donor" is the person who creates a power of appointment.  The donor is usually the owner of rights, assets, or items being ultimately appointed by the donee.
"Donee" or "holder" refers to the person who possesses a power of appointment--who has been named to appoint or transfer all or a portion of an owner's rights, assets, or items.
"Appointee" is the person who receives the rights, assets, or items as a result of the power of appointment being exercised.
"Taker in Default" is the person who receives the rights, assets, or items if the power of appointment is not exercised.

General Definition:
A "power of appointment" is a unique power given to a donee (holder) by a donor to distribute the donor's rights, assets, or items usually at the donor's death to appointees.  A donee of a power of appointment is different than a personal representative or trustee.  A donee of a power of appointment does not have the responsibility of managing a person's estate or trust assets.  Rather, the donee has the authority to appoint the donor's rights, assets, or items to appointees.  There are two types of powers of appointment: a general power of appointment and a limited (special) power of appointment.  Each of these types of powers carries different and significant tax implications.