PART 1. COMMON LAW OF POWERS ESTABLISHED WITH EXCEPTIONS PART 1. COMMON LAW OF POWERS ESTABLISHED WITH EXCEPTIONS S 10-1.1 Common law of powers retained, except as modified by this article The common law of powers as embodied in this article and as to matters not included herein, as heretofore established, is retained as the law of this state except as modified by the provisions of this article. PART 2. DEFINITIONS S 10-2.1 Power A power is an authority to do any act in relation to property, including the creation or revocation of an estate therein or a charge thereon, which the donor of the power might himself do, except that the term, as used in this article, does not apply to a power of attorney to convey property in the name of the owner, regulated by other statutes. S 10-2.2 Other words defined (a) Donor. A donor is the person who creates or reserves a power. (b) Donee. A donee is the person to whom a power is given or in whose favor a power is reserved. (c) Appointee. An appointee is the person in whose favor a power of appointment is exercisable. (d) Appointive property. Appointive property is property which is the subject of a power of appointment. PART 3. VARIETIES OF POWERS S 10-3.1 Powers of appointment and other powers (a) This article applies to powers of appointment. A power of appointment, as the term is used in this article, is an authority created or reserved by a person having property subject to his disposition, enabling the donee to designate, within such limits as may be prescribed by the donor, the appointees of the property or the shares or the manner in which such property shall be received. (b) This article applies, generally, to powers which are not powers of appointment, such as a power to revoke a disposition previously made, a power during minority to manage property vested in an infant, a power to disburse the principal of a trust, a power to sell in a mortgage and a power in a life tenant to make leases. This enumeration is not exclusive but illustrative. S 10-3.2 Classification of powers of appointment as to kind; general and special; exclusive and non-exclusive (a) A power of appointment is: (1) general or special. (2) exclusive or non-exclusive. (b) A power of appointment is general to the extent that it is exercisable wholly in favor of the donee, his estate, his creditors or the creditors of his estate. (c) All other powers of appointment are special. (d) A special power of appointment is exclusive if it may be exercised in favor of one or more of the appointees to the exclusion of the others. (e) A special power of appointment is non-exclusive if it must be exercised in favor of all the appointees. S 10-3.3 Classification of powers of appointment as to time of exercise; presently exercisable, testamentary and postponed (a) A power of appointment, as to the time of its exercise, is either presently exercisable, testamentary or postponed. (b) A power of appointment is presently exercisable if it may be exercised by the donee, during his lifetime or by his written will, at any time after its creation, and does not include a postponed power as described in paragraph (d). (c) A power of appointment is testamentary if it is exercisable only by a written will of the donee. (d) A power of appointment is postponed if it is exercisable by the donee only after the expiration of a stated time or after the occurrence or non-occurrence of a specified event. S 10-3.4 Classification of powers of appointment as to duty to exercise; imperative and discretionary (a) A power of appointment is either imperative or discretionary. (b) A power of appointment is imperative if the instrument creating it imposes on the donee a duty to exercise it, and it may be imperative even though it is exclusive. (c) A power of appointment is discretionary if the donee is authorized to exercise or not to exercise it. PART 4. CREATION OF A POWER OF APPOINTMENT S 10-4.1 Rules for creation of a power of appointment. (a) The donor of a power of appointment: (1) Must be a person capable of transferring the appointive property. (2) Must have created or reserved the power by a written instrument executed by him in the manner required by law. (3) Must manifest his intention to confer the power on a person capable of holding the appointive property. (4) Cannot nullify or alter the rights of creditors of the donee, as defined in this article, by any language in the instrument creating or reserving the power purporting to give the interest of such donee a spendthrift character. PART 5. EXTENT OF DONEE`S AUTHORITY TO APPOINT OR CONTRACT TO APPOINT AN ESTATE IN APPOINTIVE PROPERTY S 10-5.1 Scope of the authority of the donee The scope of the donee`s authority as to appointees and as to the time and manner of the appointment is unlimited except as the donor manifests a contrary intention. S 10-5.2 Contract to appoint; power presently exercisable The donee of a power of appointment which is presently exercisable, or of a postponed power which has become exercisable, can contract to make an appointment to the extent that the contract or the promised appointment does not confer a benefit upon a person who is not a permissible appointee under the power. S 10-5.3 Contract to appoint; power not presently exercisable (a) The donee of a power of appointment which is not presently exercisable, or of a postponed power which has not become exercisable, cannot contract to make an appointment; except that this prohibition shall not apply if the donor and donee are the same person. Such a prohibited contract, if made, cannot be the basis of an action for specific performance or damages, but the promisee can obtain restitution of the value given by him for the promise unless the donee has exercised the power pursuant to the contract. (b) The provisions of this section shall not abridge the ability of the donee of a power of appointment which is not presently exercisable to release his power pursuant to 10-9.2 or to make the power, after release, an imperative power, except that where the donor designated persons or a class to take in default of the donee`s exercise of the power, a release with respect to appointive property must serve to benefit all those so designated as provided by the donor. S 10-5.4 Priority The interest of the donee of a power of appointment, and of any appointee thereunder, has priority with respect to real property subject thereto, as against creditors, purchasers or incumbrancers, in good faith and without notice, of or from a person having an estate in such property, only from the time at which the instrument creating the power is duly recorded. As against all other persons, such interest has priority from the time at which the instrument creating the power takes effect. PART 6. RULES GOVERNING EXERCISE OF A POWER OF APPOINTMENT S 10-6.1 Exercise of a power of appointment; manifestation of intention of donee (a) Subject to paragraph (b), an effective exercise of a power of appointment does not require an express reference to such power. A power is effectively exercised if the donee manifests his intention to exercise it. Such a manifestation exists when the donee: (1) Declares in substance that he is exercising all the powers he has; (2) Sufficiently identifying the appointive property or any part thereof, executes an instrument purporting to dispose of such property or part; (3) Makes a disposition which, when read with reference to the property he owned and the circumstances existing at the time of its making, manifests his understanding that he was disposing of the appointive property; or (4) Leaves a will disposing of all of his property or all of his property of the kind covered by the power, unless the intention that the will is not to operate as an execution of the power appears expressly or by necessary implication. (b) If the donor has expressly directed that no instrument shall be effective to exercise the power unless it contains a specific reference to the power, an instrument not containing such reference does not validly exercise the power. S 10-6.2 Exercise of a power of appointment; conformity to directions of donor (a) Subject to the power of a court of competent jurisdiction to remedy a defective execution of an imperative power of appointment, the directions of the donor as to the manner, time and conditions of the exercise of a power must be observed, except that: (1) Where the donor has authorized it to be exercised by an instrument legally insufficient to dispose of the appointive property, the manner of exercise is to be determined by the provisions of this article. (2) Where the donor has directed any formality to be observed in its exercise, in addition to those which would be legally sufficient to dispose of the appointive property, such additional formality is not necessary to a valid exercise of such power. (3) Where the donor has made the power exercisable only by deed, it is also exercisable by a written will unless exercise by will is expressly excluded. (4) Where the donor of a general power of appointment has not expressly imposed a requirement of good faith or of reasonableness with respect to the donee`s exercise of such power, neither such requirement shall be implied. S 10-6.3 Exercise of a power of appointment; type of instrument A power of appointment can be exercised only by a written instrument which would be sufficient to dispose of the estate intended to be appointed if the donee were the actual owner. S 10-6.4 Exercise of a power of appointment; required consents (a) When the consent of the donor or of a third person to the exercise of a power of appointment is required, such consent shall be expressed in a written instrument, subscribed by the person whose consent is required; and to entitle the instrument of exercise to be recorded, the signatures of the donee and of the person consenting must be acknowledged or proved in the manner required by the laws of this state for the recording of a deed of real property. (b) Unless the donor expressly provides otherwise: (1) When the consents of two or more persons are required for the exercise of a power of appointment, all must consent. (2) If before the exercise of the power: (A) One or more of such persons die, the consent of the survivor is sufficient. (B) One or more of such persons become incompetent, the consent of the competent person is sufficient. S 10-6.5 Exercise of exclusive and non-exclusive power of appointment (a) Unless the donor expressly provides otherwise: (1) The donee of an exclusive power may appoint all or any part of the appointive property to one or more of the appointees to the exclusion of the others. (2) The donee of a non-exclusive power must appoint in favor of all of the appointees equally. S 10-6.6 Exercise of a power of appointment; effect when more extensive or less extensive than authorized; trustee`s authority to invade principal in trust. (a) An exercise of a power of appointment is not void because its exercise is: (1) More extensive than was authorized but is valid to the extent authorized by the instrument creating the power. (2) Less extensive than authorized by the instrument creating the power, unless the donor has manifested a contrary intention. (b) Unless the terms of the instrument expressly provide otherwise: (1) A trustee who has the absolute discretion, under the terms of a testamentary instrument or irrevocable inter vivos trust agreement, to invade the principal of a trust for the benefit of one or more proper objects of the exercise of the power, may exercise such discretion by appointing all or part of the principal of the trust in favor of a trustee of a trust under an instrument other than that under which the power to invade is created or under the same instrument, provided, however, that the exercise of such discretion (A) does not reduce any fixed income interest of any income beneficiary of the trust, (B) is in favor of the proper objects of the exercise of the power, and (C) does not violate the limitations of 11-1.7; and (2) A trustee described in subparagraph (1) of this paragraph may act thereunder without consent of any interested person and without prior court approval but is also authorized to seek such court approval, and the court having jurisdiction of the trust, upon the petition of the trustee and upon notice to all persons interested in the trust, may direct the trustee to exercise its discretion by appointing all or part of the principal of the trust in favor of a trustee of a trust under an instrument other than that under which the power to invade is created or under the same instrument, provided, however, that the exercise of such discretion (A) does not reduce any fixed income interest of any income beneficiary of the trust, (B) is in favor of the proper objects of the exercise of the power, and (C) does not violate the limitations of 11-1.7. (c) Unless the court upon application of the trustee otherwise directs, the aggregate annual and principal commissions of a trustee shall not be increased by its action under paragraph (b) of this section. (d) The exercise of the power to invade the principal of the trust under subparagraph (1) of paragraph (b) of this section shall be by an instrument in writing, signed and acknowledged by the trustee and filed in the office of the clerk of the court having jurisdiction over the trust; and a copy thereof shall be served on all persons interested in the trust (or on the guardian of the property, committee, conservator or personal representative of such persons or the parent or person with whom a minor resides), by registered or certified mail, return receipt requested, or by personal delivery or upon application of the trustee in any other manner directed by the court. (e) For the purposes of this section, the phrase "all persons interested in the trust" shall mean all the persons upon whom service of process would be required in a proceeding for the judicial settlement of the account of the trustee, taking into account section three hundred fifteen of the surrogate`s court procedure act. (f) The exercise of the power to invade the principal of the trust under paragraph (b) of this section shall be considered the exercise of a special power of appointment as defined in 10-3.2 and shall be subject to the provisions of 10-8.1 and 10-8.2 covering the time at which the permissible period of the rule against perpetuities begins and the law which determines the permissible period of the rule against perpetuities. (g) The provisions of this section shall not be construed to abridge the right of any trustee who has a power of invasion to appoint property in further trust which arises under any other section of this chapter or under another statute or under common law.
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S 10-6.7 Exercise by all donees; exceptions Whenever a power of appointment is created in two or more donees, all must unite in its exercise, unless the instrument creating such power provides otherwise. But, if before its execution, one or more of such donees dies or becomes incompetent, such power may be exercised by the survivor or the competent donee, unless such exercise is explicitly barred by the terms of the instrument creating such power. S 10-6.8 Imperative power of appointment; effectuation (a) The exercise of an imperative power of appointment devolves upon the supreme court or, in the case of a will, the surrogate`s court in the following cases: (1) Failure to designate the donee. (2) Death of the designated donee without exercising the power. (3) Incompetence of the sole donee. (4) Defective exercise of the power, either wholly or in part, by the donee. (b) Where an imperative power of appointment: (1) Is exclusive, and the donee dies without exercising the power, it must be exercised for the benefit of all of the appointees equally. (2) Has been exercised defectively by the donee, it may be properly exercised in favor of persons intended to be benefited by the donee. (3) Has been exercised defectively by the donee, a purchaser for a valuable consideration claiming under such defective exercise is entitled to the same relief as a similar purchaser claiming under a defective disposition from an actual owner. (4) Is non-exclusive, and the right of the appointee is assignable, creditors or assignees of such appointee can compel the exercise of such power for their benefit. (5) Is non-exclusive, the committee of an appointee or his assignee for the benefit of creditors can compel the exercise of such power. S 10-6.9 Exercise of a power of appointment in further trust If the donee of a power of appointment exercises the power in favor of the trustee of a trust under a will or deed other than that under which the power was created, and if said exercise is otherwise valid, the appointive property shall be paid over to and administered by the trustee of, and under the terms of, the trust under such will or deed and jurisdiction over said appointive property shall thereafter be in the court having jurisdiction of the trust under such will or deed. PART 7. RIGHTS OF CREDITORS IN APPOINTIVE PROPERTY S 10-7.1 Creditors of the donee; special power Property covered by a special power of appointment is not subject to the payment of the claims of creditors of the donee, his estate or the expenses of administering his estate. S 10-7.2 Creditors of the donee; general power presently exercisable Property covered by a general power of appointment which is presently exercisable, or of a postponed power which has become exercisable, is subject to the payment of the claims of creditors of the donee, his estate and the expenses of administering his estate. It is immaterial whether the power was created in the donee by himself or by some other person, or whether the donee has or has not purported to exercise the power. S 10-7.3 Creditors of the donee; power subject to a condition A general power of appointment may be created subject to a condition precedent or subsequent, and until the condition is fulfilled, it is not subject to the provisions of 10-7.2. S 10-7.4 Creditors of the donee; general power not presently exercisable (a) Property covered by a general power of appointment which, when created, is not presently exercisable is subject to the payment of the claims of creditors of the donee, his estate and the expenses of administering his estate, only: (1) If the power was created by the donee in favor of himself; or (2) If a postponed power becomes exercisable in accordance with the terms of the creating instrument, except in the case of a testamentary general power. PART 8. RULE AGAINST PERPETUITIES AND ACCUMULATIONS AS AFFECTED BY POWERS OF APPOINTMENT S 10-8.1 Rule against perpetuities; time at which permissible period begins (a) Where an estate is created by an instrument exercising a power of appointment, the permissible period of the rule against perpetuities begins: (1) In the case of an instrument exercising a general power which is presently exercisable, on the effective date of the instrument of exercise. (2) In all other cases, at the time of the creation of the power. (b) Where the creator of a trust reserves to himself an unqualified power to revoke, the permissible period of the rule against perpetuities begins when the power to revoke terminates by reason of the death of the creator, by a release of such power or otherwise. S 10-8.2 Rule against perpetuities; law which determines permissible period In all cases covered by 10-8.1, the permissible period of the rule against perpetuities is determined by the law in effect when the power is exercised or the unqualified power to revoke is terminated, and not by the law in effect when the power was created. S 10-8.3 Rule against perpetuities; facts to be considered When the permissible period of the rule against perpetuities must be computed from the time of the creation of the power of appointment, facts and circumstances existing on the effective date of the instrument exercising the power shall be taken into account in determining the validity of interests created by the instrument exercising the power. S 10-8.4 Rule against accumulations; law determining validity in exercise of a power of appointment When a direction for the accumulation of income is contained in an instrument exercising a power, heretofore or hereafter created, the validity of such direction is determined by the law in effect when the power is exercised, and not by the law in effect when the power was created. PART 9. REVOCATION AND RELEASE OF A POWER OF APPOINTMENT S 10-9.1 Revocability of a power of appointment (a) A power of appointment is irrevocable unless the donor reserves the right to revoke it. (b) An exercise of power of appointment is irrevocable whenever: (1) The donor of a special power manifests his intention that its exercise be irrevocable, or (2) The donee does not manifest in the instrument exercising the power his intention to reserve a power of revocation. (c) If the donee in exercising a power reserves a power to revoke the appointment, but does not expressly reserve a power to reappoint, upon the exercise of the power of revocation, the donee can reappoint. (d) An instrument exercising a power of appointment is affected by fraud in the same manner as a deed or will, executed by an owner or by a trustee of property. S 10-9.2 Release of a power of appointment (a) Any power of appointment, whether exercisable only by deed, only by will, or by either deed or will, and whether general or special, exclusive or nonexclusive other than a power which is imperative, is releasable, either with or without consideration, by written instrument signed by the donee of such power and delivered as hereinafter provided. (b) A releasable power of appointment may be released with respect to all or any part of the appointive property and may also be released in such manner as to reduce or limit the appointees, or classes of appointees, in whose favor such power is exercisable. No release of any power of appointment shall cause the power to become imperative when such power was not imperative prior to such release, unless the instrument of release expressly so provides. (c) Such release may be delivered to any of the following: (1) Any person specified for such purpose in the instrument creating the power. (2) Any trustee of the property subject to such power. (3) Any person, other than the donee, who might be adversely affected by an exercise of the power. (4) The county clerk of the county in which the donee resides or has a place of business or in which the instrument creating the power is filed, to be duly filed by such clerk upon the payment to him of the fees due for such filing or, if the power was created by will, to the clerk of the surrogate`s court having jurisdiction of the estate of the donor. (d) This section applies to releases delivered on or after July first, nineteen hundred forty-two. PART 10. PROVISIONS AFFECTING POWERS OTHER THAN POWERS OF APPOINTMENT S 10-10.1 Power to distribute principal or allocate income; restriction on exercise A power held by a person as trustee of an express trust to make a discretionary distribution of either principal or income to such person as a beneficiary, or to make discretionary allocations in such person`s favor of receipts or expenses as between principal and income, cannot be exercised by such person unless (1) such person is the grantor of the trust and the trust is revocable by such person during such person`s lifetime, or (2) the power is a power to provide for such person`s health, education, maintenance or support within the meaning of sections 2041 and 2514 of the Internal Revenue Code, or any other ascertainable standard or (3) the trust instrument, by express reference to this section, provides otherwise. If the power is conferred on two or more trustees, it may be exercised by the trustee or trustees who are not so disqualified. If there is no trustee qualified to exercise the power, its exercise devolves on the supreme court or the surrogate`s court, except that if the power is created by will, its exercise devolves on the surrogate`s court having jurisdiction of the estate of the donor of the power. S 10-10.2 Power to lease in tenant for life; scope A power may be conferred upon a tenant for life to make leases of real property for a term of not more than twenty-one years to commence in possession during his lifetime. If the power authorizes, or the life tenant makes, a lease for a term in excess of twenty-one years, such power or lease is valid for twenty-one years, but is void as to the excess. S 10-10.3 Power to lease in tenant for life; transfer and extinguishment The power of a tenant for life to make leases is not assignable as a separate interest, but is annexed to his estate and passes by a disposition of such estate unless expressly excepted. If so excepted, it is extinguished. Such a power may be released by the tenant to a person entitled to a future estate in the property, and shall thereupon be extinguished. S 10-10.4 Power to lease in tenant for life; effect of mortgage (a) The power of a tenant for life to make leases is neither extinguished nor suspended when such tenant executes a mortgage. The power is bound by the mortgage in the same manner as the real property embraced therein, and the lien of the mortgagee on such power: (1) Entitles the mortgagee to an exercise of the power so far as the satisfaction of the debt requires; and (2) Causes any subsequent interest, created by the tenant for life by an exercise of such power, to become subject to the mortgage as if in terms embraced therein. S 10-10.5 Power to sell in a mortgage Where a power to sell real property is given to a mortgagee or to the transferee in any other conveyance intended to secure the payment of money, the power is deemed a part of the security, and passes to and may be exercised by any person, who by assignment or otherwise, becomes entitled to the money so secured to be paid. S 10-10.6 Effect of reserved unqualified power to revoke Where a creator reserves an unqualified power of revocation, he remains the absolute owner of the property disposed of so far as the rights of his creditors or purchasers are concerned. S 10-10.7 Exercise of powers by multiple fiduciaries; joint and several powers Unless contrary to the express provisions of an instrument affecting the disposition of property, a joint power other than a power of appointment, conferred upon three or more fiduciaries, as that term is defined in 11-1.1, by the terms of such instrument, or by statute, or arising by operation of law, may be exercised by a majority of such fiduciaries, or by a majority of survivor fiduciaries, or by the survivor fiduciary. Such a power conferred upon or surviving to two such fiduciaries may be exercised jointly by both such fiduciaries or by the survivor fiduciary, unless contrary to the express terms of the instrument creating the power. A fiduciary who fails to act through absence or disability, or a dissenting fiduciary who joins in carrying out the decision of a majority of the fiduciaries if his dissent is expressed promptly in writing to his co-fiduciaries, shall not be liable for the consequences of any majority decision, provided that liability for failure to join in administering the estate or trust or to prevent a breach of the trust may not thus be avoided. A power vested in one or more persons under a trust of real property created in connection with the salvaging of mortgage participation certificates may be executed by one or more of such persons as provided in such trust. This section shall not affect the right of any one of two or more personal representatives of a decedent to exercise a several power. S 10-10.8 Irrevocability of powers other than powers of appointment A power, other than a power of appointment, is irrevocable unless an authority to revoke it is granted or reserved in the instrument creating the power.
