A power of appointment gives an individual (the donee) the authority to distribute the property of the original testator under their will or a settlor under a trust (the donor).
Classification by the nature of the class of objects
There are three types of power of appointment differentiated by the range of potential objects in whose favour the power may be exercised:
- general power;
- special power;
- hybrid power.
Under a general power of appointment, the donee enjoys the right to allocate the property by appointment to anyone he wishes, including himself (Hinves v Brooke (1990)). This extremely wide power is tantamount to absolute ownership by the donee.
Where the donor specifies that the power of appointment should only be exercised in favour of a class of people, it is said to be a special power. The donee can choose who to settle the property upon, but any appointments made must be to persons within the specified class (Re Dilke (1920)).
A hybrid or intermediate power entitles the donee to make appointments in favour of anyone except the members of a specified class (Re Park (1931). It is transformed into a general power when the excluded persons cease to exist or have never existed (Re Harvey (1950).
Classification by donee’s duties
Powers may also be divided into those where the donee owes no duty of a fiduciary nature to the potential objects of the power, and those where some fiduciary duties are owed.
Bare or mere powers
If the donee of the power does not hold the power in a fiduciary capacity, he owes no duties to the objects concerning its exercise. He is under no duty to exercise it, and need not even consider whether he should exercise the power. This type of power is known as a bare or mere power.
In Re Weekes’ Settlement (1897), Mrs Slade granted a life interest of her estate to her husband and gave him a special power of appointment over the reversionary interest in favour of their eight surviving children. There was no gift over in default of appointment. Mr Slade died intestate without having exercised the power. The court held that a mere power of appointment was given to the husband and not a trust power. The court could therefore not intervene in favour of the children; the property went to the testatrix’s heir.
If the donee holds the power of appointment in a fiduciary capacity – eg, if it is a power arising under a trust of which he is the trustee – he owes limited fiduciary duties to the potential objects of the powers.
In Re Hay’s Settlement Trust (1982), Megarry VC stated that the donee has a duty to periodically consider whether or not to exercise the power, a duty to consider the range of potential objects of the power and a duty to consider the appropriateness of individual appointments.