Which statement about general powers of appointment carry transfer tax consequences?

Which statement about general powers of appointment carry transfer tax consequences?

• A. Transfer tax consequences
• B. Estate tax only
• C. No tax consequences
• D. Inapplicable to trusts

Answer: (A)

A general power of appointment is a broad authority that allows the holder to direct who will receive the property, including the holder or the holder’s estate. Because the power is exercisable in a way that could benefit the holder or their estate, the value of property subject to that power is included in the holder’s gross estate for estate tax purposes. This inclusion creates transfer tax consequences—the estate tax framework treats the property as if the holder controlled it at death. It’s not no tax consequence, nor is it inapplicable to trusts, and while the estate tax aspect is central, framing it as transfer tax consequences captures the relevant tax impact.

A general power of appointment is a broad authority that allows the holder to direct who will receive the property, including the holder or the holder’s estate. Because the power is exercisable in a way that could benefit the holder or their estate, the value of property subject to that power is included in the holder’s gross estate for estate tax purposes. This inclusion creates transfer tax consequences—the estate tax framework treats the property as if the holder controlled it at death. It’s not no tax consequence, nor is it inapplicable to trusts, and while the estate tax aspect is central, framing it as transfer tax consequences captures the relevant tax impact.