Release or restrict the future exercise of the power of appointment

Trusts Discussion
1

Could anyone help me with the interpretation of this clause in a discretionary and irrevocable Deed of Trust? Powers are discretionary in nature.
“The TRUSTEES may release or restrict the future exercise of the power of appointment by deed or deeds either wholly or in connection with any part or parts of the TRUST FUND.”
Thank you very much

2

It means the trustees can release or restrict the future exercise of the power of appointment. They could release it entirely or (for example) restrict its use in time or to a limited class of beneficiaries.

3

Thank you for your support.
II the specific case, the trustee is given a mere discretionary dispositive power of appontment, T is not under any obligatioon too consider whether to exercise his power as, in default, the ultimate default trust takes effect.

4

Yes, it’s commonly included (and occasionally used) in relation to discretionary powers.

It would, for example, allow beneficiaries to be excluded (by means other than a power of exclusion) or allow a default trust to take effect absolutely, rather than subject to a power.

5

All trustees are under a duty to at least consider whether or not to exercise a discretionary power. They can properly in a given case reach the positive conclusion to allow the default clause to operate or if relevant to activate the clause quoted above. The only thing they cannot safely do is to give these matters no consideration at all.

Jack Harper

Thank you for your support.
II the specific case, the trustee is given a mere discretionary dispositive power of appontment, T is not under any obligatioon too consider whether to exercise his power as, in default, the ultimate default trust takes effect.

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Previous Replies

Sarah:

release or restrict the future exercise of the power of appointment

It means the trustees can release or restrict the future exercise of the power of appointment. They could release it entirely or (for example) restrict its use in time or to a limited class of beneficiaries.

6

Thank you so much.

Thanks for the clarification. It was important to distinguish the difference between “trust” and “mere power”. My interpretation had led me to think it was a “mere dispositive discretion POA”, rather than a “dispositive discretion in the nature of a trust”.

Thanks a lot.
Sarah

7

Trustee powers in a DT are not going to be “mere powers” and furthermore are ipso facto fiduciary. Strictly only the default clause is a trust while the power to appoint to beneficiaries in the eligible class is a power. The law on non-fiduciary mere powers diverges, An example of such a power is where a person not a trustee has a power of appointment; significantly such a person can choose to do nothing at all, not even consider exercise.

Jack Harper

Thank you so much.

Thanks for the clarification. It was important to distinguish the difference between “trust” and “mere power”. My interpretation had led me to think it was a “mere dispositive discretion POA”, rather than a “dispositive discretion in the nature of a trust”.

Thanks a lot.
Sarah

–
Previous Replies
All trustees are under a duty to at least consider whether or not to exercise a discretionary power. They can properly in a given case reach the positive conclusion to allow the default clause to operate or if relevant to activate the clause quoted above. The only thing they cannot safely do is to give these matters no consideration at all.

Jack Harper

Thank you for your support.
II the specific case, the trustee is given a mere discretionary dispositive power of appontment, T is not under any obligatioon too consider whether to exercise his power as, in default, the ultimate default trust takes effect.

–
Previous Replies

Sarah:

release or restrict the future exercise of the power of appointment

It means the trustees can release or restrict the future exercise of the power of appointment. They could release it entirely or (for example) restrict its use in time or to a limited class of beneficiaries.

Yes, it’s commonly included (and occasionally used) in relation to discretionary powers.

It would, for example, allow beneficiaries to be excluded (by means other than a power of exclusion) or allow a default trust to take effect absolutely, rather than subject to a power.

Thank you for your support.
II the specific case, the trustee is given a mere discretionary dispositive power of appontment, T is not under any obligatioon too consider whether to exercise his power as, in default, the ultimate default trust takes effect.

8

Thank you so much Jack, really helpful for understanding.

Kind regards

Sarah

9

I deeply considered the answers you kindly provided me, but I still don’t understand the reason for this clause (release or restrict the future exercise of POA). Why should a trustee relieve himself from exercising the power of appointment and let the default clause activate?

Thank you very much.

10

Because the existence of the power may be an impediment to operation of the trust. It will not usually be limited in point of time save by the perpetuity period. If it is released it means that the objects of the power then have no further interest under the trust. So their consent would be unnecessary to a variation of trust. Simply appointing to the default beneficiary, if they are also an object, would have the same effect but might not be desirable in the circumstances. For example an absolute appointment to one who was of full age would terminate the trust which may be unwanted

Jack Harper

I deeply considered the answers you kindly provided me, but I still don’t understand the reason for this clause (release or restrict the future exercise of POA). Why should a trustee relieve himself from exercising the power of appointment and let the default clause activate?

Thank you very much.

–
Previous Replies
Thank you so much Jack, really helpful for understanding.

Kind regards

Sarah

Trustee powers in a DT are not going to be “mere powers” and furthermore are ipso facto fiduciary. Strictly only the default clause is a trust while the power to appoint to beneficiaries in the eligible class is a power. The law on non-fiduciary mere powers diverges, An example of such a power is where a person not a trustee has a power of appointment; significantly such a person can choose to do nothing at all, not even consider exercise.

Jack Harper

Thank you so much.

Thanks for the clarification. It was important to distinguish the difference between “trust” and “mere power”. My interpretation had led me to think it was a “mere dispositive discretion POA”, rather than a “dispositive discretion in the nature of a trust”.

Thanks a lot.
Sarah

–
Previous Replies
All trustees are under a duty to at least consider whether or not to exercise a discretionary power. They can properly in a given case reach the positive conclusion to allow the default clause to operate or if relevant to activate the clause quoted above. The only thing they cannot safely do is to give these matters no consideration at all.

Jack Harper

Thank you for your support.
II the specific case, the trustee is given a mere discretionary dispositive power of appontment, T is not under any obligatioon too consider whether to exercise his power as, in default, the ultimate default trust takes effect.

–
Previous Replies

Sarah:

release or restrict the future exercise of the power of appointment

It means the trustees can release or restrict the future exercise of the power of appointment. They could release it entirely or (for example) restrict its use in time or to a limited class of beneficiaries.

Yes, it’s commonly included (and occasionally used) in relation to discretionary powers.

It would, for example, allow beneficiaries to be excluded (by means other than a power of exclusion) or allow a default trust to take effect absolutely, rather than subject to a power.

Thank you for your support.
II the specific case, the trustee is given a mere discretionary dispositive power of appontment, T is not under any obligatioon too consider whether to exercise his power as, in default, the ultimate default trust takes effect.

Thank you so much.

Thanks for the clarification. It was important to distinguish the difference between “trust” and “mere power”. My interpretation had led me to think it was a “mere dispositive discretion POA”, rather than a “dispositive discretion in the nature of a trust”.

Thanks a lot.
Sarah

All trustees are under a duty to at least consider whether or not to exercise a discretionary power. They can properly in a given case reach the positive conclusion to allow the default clause to operate or if relevant to activate the clause quoted above. The only thing they cannot safely do is to give these matters no consideration at all.

Jack Harper

Thank you for your support.
II the specific case, the trustee is given a mere discretionary dispositive power of appontment, T is not under any obligatioon too consider whether to exercise his power as, in default, the ultimate default trust takes effect.

–
Previous Replies

Sarah:

release or restrict the future exercise of the power of appointment

It means the trustees can release or restrict the future exercise of the power of appointment. They could release it entirely or (for example) restrict its use in time or to a limited class of beneficiaries.

11

Thank you for your contribution which was truly valuable. I looked deeper and understood the purpose.

Best wishes
Sarah