California Code of Regulations › Title 18 - Public Revenues › Division 2.5 - State Controller › Chapter 1 - Inheritance Tax › Article 4.4 - Powers of Appointment › Section 13692.1 - Powers of Appointment-Nature and Scope

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) In General.
The term "power of appointment" includes all powers which
					 are in substance and effect powers of appointment regardless of the
					 nomenclature used in creating the power. For example, if a trust instrument
					 provides that the beneficiary may appropriate or consume the principal of the
					 trust, the power to consume or appropriate is a power of appointment.
					 Similarly, a power given to a decedent to affect the beneficial enjoyment of
					 trust property or its income by altering, amending or revoking the trust
					 instrument or terminating the trust is a power of appointment; except that a
					 power granted to a trustee to make discretionary payments of principal or
					 income to or for the benefit of a trust beneficiary (or beneficiaries) other
					 than the trustee, including the power to terminate the trust, in whole or in
					 part, is not taxed as a power of appointment. (See Section
					 13694(b)). A
					 power in a donee to remove or discharge a trustee and appoint himself may be a
					 power of appointment. For example, if under the term of a trust, the trustee or
					 his successor has the power to appoint the principal or income of the trust for
					 the benefit of individuals including himself, and the decedent has the
					 unrestricted power to remove or discharge the trustee and appoint any other
					 persons including himself, the decedent is considered as having a power of
					 appointment. However, the decedent is not considered to have a power of
					 appointment if he only had the power to appoint a successor trustee, including
					 himself, under limited conditions which did not exist at the time of his death
					 without an accompanying unrestricted power of removal. A power to amend only
					 the administrative provisions of a trust which cannot affect the beneficial
					 enjoyment of the trust property or income is not a power of appointment. The
					 mere power of management, investment, custody of assets, or the power to
					 allocate receipts or disbursements between income and principal, exercisable in
					 a fiduciary capacity, whereby the holder has no power to enlarge or shift any
					 of the beneficial interests therein is not a power of appointment. Further, the
					 right in a beneficiary of a trust to assent to a periodic accounting, thereby
					 relieving the trustee from further accountability, is not a power of
					 appointment if the right of assent does not consist of any power or right to
					 enlarge or shift the beneficial interest of any beneficiary therein. Deposits
					 of a husband and wife made in their names to a joint trustee account with power
					 to revoke are treated as in joint tenancy upon the death of the first spouse to
					 die and not as a transfer of a power of appointment to the surviving spouse,
					 per Revenue and Taxation Code Section
					 13671.
(b) Relation to Other Sections.
For purposes of these regulations the term "power of
					 appointment" does not include powers reserved by the decedent to himself within
					 the concept of Revenue and Taxation Code Sections
					 13643,
					 13644
					 and
					 13646.
					 No provisions of Revenue and Taxation Code Sections
					 13691
					 through
					 13701
					 or of these regulations is to be construed as in any way limiting the
					 application of any other section of the Inheritance Tax Law or of these
					 regulations. The power of the owner of a property interest already possessed by
					 him to dispose of his interest and nothing more, is not a power of appointment,
					 but the transfer of such interest is subject to tax insofar as other provisions
					 of Article 3 of Chapter 4 of the Inheritance Tax Law may be
					 applicable.
(c) Powers over
				  a Portion of Property.
If a power of appointment exists as to part of an entire
					 group of assets or only over a limited interest in property, Revenue and
					 Taxation Code Sections
					 13691
					 through
					 13701
					 apply only to such part or interest. For example, if a trust created by D
					 provided for payment of income to A for life then to B for life, with power in
					 A to appoint the remainder by will and in default of appointment for payment of
					 the remainder to X, and if A dies before B the sections apply only to the value
					 of the remainder excluding B's life estate. If A dies after B the sections
					 apply to the entire property. If the power is restricted to only one-half the
					 remainder, the sections apply only to one-half the value of the interests
					 described above.
(d)
				  Definition of "Exercise" of Power of Appointment.
Whether a power of appointment is in fact exercised depends
					 upon the general law applicable to the particular situation. The manner in
					 which powers of appointment may be exercised is provided in Chapters 4-8
					 (commencing with Section
					 1384.1), Title 7, Part 4, Division
					 2 of the Civil Code. A valid exercise designates the appointed person or
					 persons to whom the transfer is made from the donee of the power, and upon such
					 a transfer the taxability or nontaxability is determined. In the case of a
					 failure to exercise the power the transfer upon which the tax is determined is
					 from the donee of the power to the person or persons who take in default of the
					 exercise thereof.
NOTE: Reference: Section
					 13692,
					 Revenue and Taxation Code.