Sponsored by:
Assemblyman JOSEPH V. EGAN
District 17 (Middlesex and Somerset)
SYNOPSIS
Concerns powers of appointment established by will, trust, or other governing instrument.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning powers of appointment established by will, trust, or other governing instrument, and amending N.J.S.3B:3-45.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. N.J.S.3B:3-45 is amended to read as follows:
3B:3-45. Exercise of power of appointment.
a. Whenever a testator’s will provides for a power of appointment to another person, who as the donee of the power is authorized to further dispose of the testator’s property amongst appointees selected by the donee, that donee, other than a donee acting in the capacity of a trustee or other fiduciary, shall be deemed authorized to exercise the power to create less than absolute interests for the benefit of one or more of the permissible appointees, including interests in trust and the creation of new powers of appointment, whether general or limited, exercisable by the one or more appointees. A testator’s direction that property subject to a power of appointment be distributed “to” an appointee, or to an appointee “outright,” “in fee simple,” “absolutely,” “forever,” or any other term, phrase, or statement of similar import, shall not be deemed to evidence the testator’s intention to prohibit the exercise of a power of appointment to create less than absolute interests, including interests in trust.
b. A general residuary clause in a will, or a will making general disposition of all of the testator's property, does not exercise a power of appointment held by the testator unless specific reference is made to the power or there is some other indication of intention to include the property subject to the power.
(cf: N.J.S.3B:3-45)
2. This act shall take effect immediately, and, pursuant to section 28 of P.L.2004, c.132 (C.3B:3-33.1) and N.J.S.3B:31-12, apply to any will, trust, or other governing instrument executed before, on, or after the effective date.
STATEMENT
This bill concerns powers of appointment established by will and is intended to codify longstanding New Jersey case law. The purpose of the power of appointment is to allow a testator, when preparing a will, to name another party, who, as the donee of the power, appoints the one or more appointees to be the recipients of the testator’s property following the testator’s death. An example: A testator’s will transfers all property in trust, to pay income to the testator’s spouse for life and upon the spouse’s death, to such person or persons as the spouse shall appoint (the spouse is the donee of the testator’s power of appointment, which is to be exercised upon the spouse’s death and likely evidenced by appointments made in the spouse’s own will).
The bill states that whenever a testator’s will provides for a power of appointment to a donee, that donee, other than a donee acting in the capacity of a trustee or other fiduciary, is deemed authorized to exercise the power of appointment to create less than absolute interests for the benefit of one or more permissible appointees, including interests in trust and the creation of new powers of appointment, whether general or limited, exercisable by the one or more appointees. Additionally, a testator’s direction that property subject to a power of appointment be distributed “to” an appointee, or to an appointee “outright,” “in fee simple,” “absolutely,” “forever,” or any other term, phrase, or statement of similar import, would not be deemed to evidence the testator’s intention to prohibit the exercise of a power of appointment to create less than absolute interests, including interests in trust.
Although the main body of the bill (section 1, the operational section) only makes specific reference to a will as the instrument by which a power of appointment is made, as noted in the bill’s effective date section (section 2), the provisions of the bill would also apply to a trust or other governing instrument established by a trust settlor or creator of another governing instrument based upon the application of various rules of construction concerning wills to those other instruments as set forth in section 28 of P.L.2004, c.132 (C.3B:3-33.1) and N.J.S.3B:31-12.
The bill would take effect immediately, and apply to any will or other instrument executed before, on, or after the effective date.