Power in the nature of a trust refers to a legal arrangement where an individual (the grantor or settlor) grants another person or entity (the trustee) the authority to manage assets or property for the benefit of one or more beneficiaries. Unlike a traditional trust, where the trustee holds legal title to the assets for the benefit of the beneficiaries, a power in the nature of a trust does not create a fiduciary relationship or impose specific duties on the holder of the power. Instead, the holder of the power has discretion or authority to distribute or dispose of the assets according to the terms outlined in the document granting the power. This arrangement allows the holder of the power to control or direct the use of the assets while still providing for the interests of the beneficiaries. Powers in the nature of a trust can be created in various legal contexts, such as wills, trusts, or other estate planning documents, and may be subject to specific legal requirements and limitations depending on the jurisdiction and the nature of the power granted.
A power of appointment that is conferred on an individual by name, rather than to a trustee, along with a duty to exercise that power. For example, very often a trust will authorize a person free of the trust to dispose of the trust property in his or her will; in such a situation it is expected that the power will be exercised. Potential beneficiaries may attempt to compel the exercise of this power in the courts, a move that would be unusual in the case of a power of appointment, where there is generally no such duty placed on the donee.
See also: power of appointment, power nominatum.
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This glossary post was last updated: 29th March, 2024.
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