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.
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.
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