Power of Appointment: A tool to help support tax and estate planning goals

Chelsea Hussey Article

2026 Q2 Frank Talk Newsletter

---

Power of Appointment

A tool to help support tax and estate planning goals

Last year’s One Big Beautiful Bill Act permanently increased the federal gift and estate tax exemption to $15 million for individuals ($30 million for married couples). So for many people, the federal estate tax may no longer be a primary concern. Instead, you may be refocused on creating estate planning flexibility and minimizing income tax. One underutilized planning tool that might be useful is the power of appointment.

2 types

A power of appointment is a legal authority granted by a trust or will to a “powerholder,” who enjoys nonfiduciary authority to direct property distribution. There are two main types of powers:

General. With general powers, the powerholder can appoint the assets to themselves, their estate or their creditors. Assets are typically included in the holder’s taxable estate. However, property included in the holder’s estate receives a stepped-up basis to fair market value (potentially erasing substantial capital gain) on the date of death. So if you’re the holder, your heirs can sell property that was covered by a general power of appointment with little or no income tax consequences.

Limited (or special). Here, the holder can give the assets to a select group of people who’ve been specifically identified by the deceased. For example, a limited power of appointment might provide that a surviving spouse can give property to surviving children, as the spouse chooses, but not to anyone else. Thus, this power is more restrictive than a general power of appointment.

Depending on the legal document’s parameters, holders may be able to transfer assets during their lifetimes or upon their death. Limited powers generally don’t permit holders to transfer assets to themselves, which keeps the assets out of the holder’s estate and protected from creditors. However, the heirs may inherit the property with a carryover, not a stepped-up, basis. This means that if the heirs sell appreciated property, they face a potentially high capital gains tax.

Talk to your estate planning advisor for more information. © 2026

Important Disclosures

This material is provided for general informational and educational purposes only and is not intended as individualized investment, tax, or legal advice. You should consult with your financial, tax, and/or legal professionals regarding your individual circumstances.

Investment advisory services offered through Planned Financial Services, LLC, dba Return on Life Wealth Partners, an SEC-registered investment adviser.