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AB-1622 Uniform Powers of Appointment Act.(2013-2014)

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CALIFORNIA LEGISLATURE— 2013–2014 REGULAR SESSION

Assembly Bill
No. 1622


Introduced by Assembly Member Bonta

February 06, 2014


An act to repeal and add Part 14 (commencing with Section 600) of Division 2 of the Probate Code, relating to the powers of appointment.


LEGISLATIVE COUNSEL'S DIGEST


AB 1622, as introduced, Bonta. Uniform Powers of Appointment Act.
Existing law provides for the creation, exercise, and release of powers of appointment, as specified.
This bill would repeal those provisions and establish instead the Uniform Powers of Appointment Act.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Part 14 (commencing with Section 600) of Division 2 of the Probate Code is repealed.

SEC. 2.

 Part 14 (commencing with Section 600) is added to Division 2 of the Probate Code, to read:

PART 14. UNIFORM POWERS OF APPOINTMENT ACT

CHAPTER  1. General Provisions

600.
 This part shall be known and may be cited as the Uniform Powers of Appointment Act.

601.
 For purposes of this part, the following definitions apply:
(a) “Appointee” means a person to which a powerholder makes an appointment of appointive property.
(b) “Appointive property” means the property or property interest subject to a power of appointment.
(c) “Blanket-exercise clause” means a clause in an instrument that exercises a power of appointment and is not a specific-exercise clause. The term includes a clause that does any of the following:
(1) Expressly uses the words “any power” in exercising any power of appointment the powerholder has.
(2) Expressly uses the words “any property” in appointing any property over which the powerholder has a power of appointment.
(3) Disposes of all property subject to disposition by the powerholder.
(d) “Donor” means a person that creates a power of appointment.
(e) “Exclusionary power of appointment” means a power of appointment exercisable in favor of any one or more of the permissible appointees to the exclusion of the other permissible appointees.
(f) “General power of appointment” means a power of appointment exercisable in favor of the powerholder, the powerholder’s estate, a creditor of the powerholder, or a creditor of the powerholder’s estate.
(g) “Gift-in-default clause” means a clause identifying a taker in default of appointment.
(h) “Impermissible appointee” means a person that is not a permissible appointee.
(i) “Instrument” means a record.
(j) “Nongeneral power of appointment” means a power of appointment that is not a general power of appointment.
(k) “Permissible appointee” means a person in whose favor a powerholder may exercise a power of appointment.
(l) “Person” means an individual, estate, trust, business or nonprofit entity, public corporation, government or governmental subdivision, agency, or instrumentality, or other legal entity.
(m) “Power of appointment” means a power that enables a powerholder acting in a nonfiduciary capacity to designate a recipient of an ownership interest in or another power of appointment over the appointive property. The term does not include a power of attorney.
(n) “Powerholder” means a person in which a donor creates a power of appointment.
(o) “Presently exercisable power of appointment” means a power of appointment exercisable by the powerholder at the relevant time. The term:
(1) Includes a power of appointment not exercisable until the occurrence of a specified event, the satisfaction of an ascertainable standard, or the passage of a specified time only after any of the following:
(A) The occurrence of the specified event.
(B) The satisfaction of the ascertainable standard.
(C) The passage of the specified time.
(2) Does not include a power exercisable only at the powerholder’s death.
(p) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
(q) “Specific-exercise clause” means a clause in an instrument that specifically refers to and exercises a particular power of appointment.
(r) “Taker in default of appointment” means a person that takes all or part of the appointive property to the extent the powerholder does not effectively exercise the power of appointment.
(s) “Terms of the instrument” means the manifestation of the intent of the maker of the instrument regarding the instrument’s provisions as expressed in the instrument or as may be established by other evidence that would be admissible in a legal proceeding.

602.
 Unless the terms of the instrument creating a power of appointment manifest a contrary intent, both of the following apply:
(a) The creation, revocation, or amendment of the power is governed by the law of the donor’s domicile at the relevant time.
(b) The exercise, release, or disclaimer of the power, or the revocation or amendment of the exercise, release, or disclaimer of the power, is governed by the law of the powerholder’s domicile at the relevant time.

603.
 The common law and principles of equity supplement this part, except to the extent modified by this part or law of this state other than this part.

CHAPTER  2. Creation, Revocation, and Amendment of Power of Appointment

605.
 (a) A power of appointment is created only if both of the following conditions are satisfied:
(1) The instrument creating the power:
(A) Is valid under applicable law; and
(B) Except as otherwise provided in subdivision (b), transfers the appointive property.
(2) The terms of the instrument creating the power manifest the donor’s intent to create in a powerholder a power of appointment over the appointive property exercisable in favor of a permissible appointee.
(b) Subparagraph (B) of paragraph (1) of subdivision (a) does not apply to the creation of a power of appointment by the exercise of a power of appointment.
(c) A power of appointment may not be created in a deceased individual.
(d) Subject to an applicable rule against perpetuities, a power of appointment may be created in an unborn or unascertained powerholder.

606.
 A powerholder may not transfer a power of appointment. If a powerholder dies without exercising or releasing a power, the power lapses.

607.
 Subject to Section 609, and unless the terms of the instrument creating a power of appointment manifest a contrary intent, the power is all of the following:
(a) Presently exercisable.
(b) Exclusionary.
(c) Except as otherwise provided in Section 608, general.

608.
 Unless the terms of the instrument creating a power of appointment manifest a contrary intent, the power is nongeneral if both of the following conditions are satisfied:
(a) The power is exercisable only at the powerholder’s death.
(b) The permissible appointees of the power are a defined and limited class that does not include the powerholder’s estate, the powerholder’s creditors, or the creditors of the powerholder’s estate.

609.
 (a) For purposes of this section, “adverse party“ means a person with a substantial beneficial interest in property which would be affected adversely by a powerholder’s exercise or nonexercise of a power of appointment in favor of the powerholder, the powerholder’s estate, a creditor of the powerholder, or a creditor of the powerholder’s estate.
(b) If a powerholder may exercise a power of appointment only with the consent or joinder of an adverse party, the power is nongeneral.
(c) If the permissible appointees of a power of appointment are not defined and limited, the power is exclusionary.

610.
 A donor may revoke or amend a power of appointment only to the extent either of the following conditions is satisfied:
(a) The instrument creating the power is revocable by the donor.
(b) The donor reserves a power of revocation or amendment in the instrument creating the power of appointment.

CHAPTER  3. Exercise of Power of Appointment

615.
 (a) A power of appointment is exercised only if both of the following conditions are satisfied:
(1) The instrument exercising the power is valid under applicable law.
(2) The terms of the instrument exercising the power do both of the following:
(A) Manifest the powerholder’s intent to exercise the power.
(B) Subject to Section 618, satisfy the requirements of exercise, if any, imposed by the donor.
(b) A power of appointment is exercised only to the extent the appointment is a permissible exercise of the power.

616.
 (a) For purposes of this section, both of the following shall apply:
(1) “Residuary clause” does not include a residuary clause containing a blanket- exercise clause or a specific-exercise clause.
(2) “Will” includes a codicil and a testamentary instrument that revises another will.
(b) A residuary clause in a powerholder’s will, or a comparable clause in the powerholder’s revocable trust, manifests the powerholder’s intent to exercise a power of appointment only if all of the following conditions are satisfied:
(1) The terms of the instrument containing the residuary clause do not manifest a contrary intent.
(2) The power is a general power exercisable in favor of the powerholder’s estate.
(3) There is no gift-in-default clause or the gift-in-default clause is ineffective.
(4) The powerholder did not release the power.

617.
 Unless the terms of the instrument exercising a power of appointment manifest a contrary intent, one of the following applies:
(a) Except as otherwise provided in subdivision (b), a blanket-exercise clause extends to a power acquired by the powerholder after executing the instrument containing the clause.
(b) If the powerholder is also the donor of the power, the clause does not extend to the power unless there is no gift-in-default clause or the gift-in-default clause is ineffective.

618.
 A powerholder’s substantial compliance with a formal requirement of appointment imposed by the donor, including a requirement that the instrument exercising the power of appointment make reference or specific reference to the power, is sufficient if both of the following conditions are satisfied:
(a) The powerholder knows of and intends to exercise the power.
(b) The powerholder’s manner of attempted exercise of the power does not impair a material purpose of the donor in imposing the requirement.

619.
 (a) A powerholder of a general power of appointment that permits appointment to the powerholder or the powerholder’s estate may make any appointment, including an appointment in trust or creating a new power of appointment, that the powerholder could make in disposing of the powerholder’s own property.
(b) A powerholder of a general power of appointment that permits appointment only to the creditors of the powerholder or of the powerholder’s estate may appoint only to those creditors.
(c) Unless the terms of the instrument creating a power of appointment manifest a contrary intent, the powerholder of a nongeneral power may do one of the following:
(1) Make an appointment in any form, including an appointment in trust, in favor of a permissible appointee.
(2) Create a general power in a permissible appointee.
(3) Create a nongeneral power in any person to appoint to one or more of the permissible appointees of the original nongeneral power.

620.
 (a) Subject to Sections 620.3 and 620.7, an appointment to a deceased appointee is ineffective.
(b) Unless the terms of the instrument creating a power of appointment manifest a contrary intent, a powerholder of a nongeneral power may exercise the power in favor of, or create a new power of appointment in, a descendant of a deceased permissible appointee whether or not the descendant is described by the donor as a permissible appointee.

620.3.
 (a) Except as provided in subdivision (b), if an appointment by will or by instrument effective only at the death of the powerholder is ineffective because of the death of an appointee before the appointment becomes effective and the appointee leaves issue surviving the powerholder, the surviving issue of the appointee take the appointed property in the same manner as the appointee would have taken had the appointee survived the powerholder, except that the property passes only to persons who are permissible appointees, including appointees permitted under Section 620.7. If the surviving issue are all of the same degree of kinship to the deceased appointee, they take equally, but if of unequal degree, then those of more remote degree take in the manner provided in Section 240.
(b) This section does not apply if either the donor or powerholder manifests an intent that some other disposition of the appointive property shall be made.

620.7.
 (a) Unless the creating instrument expressly provides otherwise, if a permissible appointee dies before the exercise of a nongeneral power of appointment, the powerholder has the power to appoint to the issue of the deceased permissible appointee, whether or not the issue was included within the description of the permissible appointees, if the deceased permissible appointee was alive at the time of the execution of the creating instrument or was born thereafter.
(b) This section applies whether the nongeneral power of appointment is exercisable by inter vivos instrument, by will, or otherwise.
(c) This section applies to a case where the power of appointment is exercised on or after July 1, 1982, but does not affect the validity of any exercise of a power of appointment made before July 1, 1982.

621.
 (a) Except as otherwise provided in Section 620, an exercise of a power of appointment in favor of an impermissible appointee is ineffective.
(b) An exercise of a power of appointment in favor of a permissible appointee is ineffective to the extent the appointment is a fraud on the power.

622.
 If a powerholder exercises a power of appointment in a disposition that also disposes of property the powerholder owns, the owned property and the appointive property shall be allocated in the permissible manner that best carries out the powerholder’s intent.

623.
 To the extent a powerholder of a general power of appointment, other than a power to withdraw property from, revoke, or amend a trust, makes an ineffective appointment, either of the following applies:
(a) The gift-in-default clause controls the disposition of the ineffectively appointed property.
(b) If there is no gift-in-default clause or to the extent the clause is ineffective, the ineffectively appointed property:
(1) Passes to either of the following:
(A) The powerholder if the powerholder is a permissible appointee and living.
(B) If the powerholder is an impermissible appointee or deceased, the powerholder’s estate if the estate is a permissible appointee.
(2) If there is no taker under paragraph (1), passes under a reversionary interest to the donor or the donor’s transferee or successor in interest.

624.
 To the extent a powerholder releases or fails to exercise a general power of appointment other than a power to withdraw property from, revoke, or amend a trust, either of the following applies:
(a) The gift-in-default clause controls the disposition of the unappointed property.
(b) If there is no gift-in-default clause or to the extent the clause is ineffective:
(1) Except as otherwise provided in paragraph (2), the unappointed property passes to either of the following:
(A) The powerholder if the powerholder is a permissible appointee and living.
(B) If the powerholder is an impermissible appointee or deceased, the powerholder’s estate if the estate is a permissible appointee.
(2) To the extent the powerholder released the power, or if there is no taker under paragraph (1), the unappointed property passes under a reversionary interest to the donor or the donor’s transferee or successor in interest.

625.
 To the extent a powerholder releases, ineffectively exercises, or fails to exercise a nongeneral power of appointment, either of the following applies:
(a) The gift-in-default clause controls the disposition of the unappointed property.
(b) If there is no gift-in-default clause or to the extent the clause is ineffective, the unappointed property either:
(1) Passes to the permissible appointees if both of the following conditions are satisfied:
(A) The permissible appointees are defined and limited.
(B) The terms of the instrument creating the power do not manifest a contrary intent.
(2) If there is no taker under paragraph (1), passes under a reversionary interest to the donor or the donor’s transferee or successor in interest.

626.
 Unless the terms of the instrument creating or exercising a power of appointment manifest a contrary intent, if the powerholder makes a valid partial appointment to a taker in default of appointment, the taker in default of appointment may share fully in unappointed property.

627.
 If a powerholder makes an appointment to a taker in default of appointment and the appointee would have taken the property under a gift-in-default clause had the property not been appointed, the power of appointment is deemed not to have been exercised and the appointee takes under the clause.

628.
 A powerholder may revoke or amend an exercise of a power of appointment only to the extent either of the following conditions is satisfied:
(a) The powerholder reserves a power of revocation or amendment in the instrument exercising the power of appointment and, if the power is nongeneral, the terms of the instrument creating the power of appointment do not prohibit the reservation.
(b) The terms of the instrument creating the power of appointment provide that the exercise is revocable or amendable.

CHAPTER  4. Disclaimer or Release: Contract to Appoint or Not to Appoint

630.
 As provided by Chapter 1 (commencing with Section 260) of Part 8:
(a) A powerholder may disclaim all or part of a power of appointment.
(b) A permissible appointee, appointee, or taker in default of appointment may disclaim all or part of an interest in appointive property.

631.
 A powerholder may release a power of appointment, in whole or in part, except to the extent the terms of the instrument creating the power prevent the release.

632.
 A powerholder of a releasable power of appointment may release the power in whole or in part by either of the following:
(a) By substantial compliance with a method provided in the terms of the instrument creating the power.
(b) If the terms of the instrument creating the power do not provide a method or the method provided in the terms of the instrument is not expressly made exclusive, by a record manifesting the powerholder’s intent by clear and convincing evidence.

633.
 A powerholder may revoke or amend a release of a power of appointment only to the extent that either of the following conditions is satisfied:
(a) The instrument of release is revocable by the powerholder.
(b) The powerholder reserves a power of revocation or amendment in the instrument of release.

634.
 A powerholder of a presently exercisable power of appointment may contract to do either of the following:
(a) Not to exercise the power.
(b) To exercise the power if the contract, when made, does not confer a benefit on an impermissible appointee.

635.
 A powerholder of a power of appointment that is not presently exercisable may contract to exercise or not to exercise the power only if both of the following conditions are satisfied:
(a) The powerholder is also the donor of the power.
(b) The powerholder has reserved the power in a revocable trust.

636.
 The remedy for a powerholder’s breach of a contract to appoint or not to appoint appointive property is limited to damages payable out of the appointive property or, if appropriate, specific performance of the contract.

CHAPTER  5. Rights of Powerholder’s Creditors in Appointive Property

640.
 (a) For purposes of this section, “power of appointment created by the powerholder” includes a power of appointment created in a transfer by another person to the extent the powerholder contributed value to the transfer.
(b) Appointive property subject to a general power of appointment created by the powerholder is subject to a claim of a creditor of the powerholder or of the powerholder’s estate to the extent provided in Chapter 1 (commencing with Section 3439) of Title 2 of Part 2 of Division 4 of the Civil Code.
(c) Subject to subdivision (b), appointive property subject to a general power of appointment created by the powerholder is not subject to a claim of a creditor of the powerholder or the powerholder’s estate to the extent the powerholder irrevocably appointed the property in favor of a person other than the powerholder or the powerholder’s estate.
(d) Subject to subdivisions (b) and (c), and notwithstanding the presence of a spendthrift provision or whether the claim arose before or after the creation of the power of appointment, appointive property subject to a general power of appointment created by the powerholder is subject to a claim of:
(1) A creditor of the powerholder, to the same extent as if the powerholder owned the appointive property, if the power is presently exercisable.
(2) A creditor of the powerholder’s estate, to the extent the estate is insufficient to satisfy the claim and subject to the right of a decedent to direct the source from which liabilities are paid, if the power is exercisable at the powerholder’s death.

641.
 (a) Except as otherwise provided in subdivision (b), appointive property subject to a general power of appointment created by a person other than the powerholder is subject to a claim of:
(1) A creditor of the powerholder, to the extent the powerholder’s property is insufficient, if the power is presently exercisable.
(2) A creditor of the powerholder’s estate, to the extent the estate is insufficient, subject to the right of a decedent to direct the source from which liabilities are paid.
(b) Subject to subdivision (c) of Section 643, a power of appointment created by a person other than the powerholder which is subject to an ascertainable standard relating to an individual’s health, education, support, or maintenance within the meaning of 26 U.S.C. Section 2041(b)(1)(A) or 26 U.S.C. Section 2514(c)(1), on January 1, 2015, is treated for purposes of this chapter as a nongeneral power.

642.
 (a) For purposes of this chapter, and except as otherwise provided in subdivision (b), a power to withdraw property from a trust is treated, during the time the power may be exercised, as a presently exercisable general power of appointment to the extent of the property subject to the power to withdraw.
(b) On the lapse, release, or waiver of a power to withdraw property from a trust, the power is treated as a presently exercisable general power of appointment only to the extent the value of the property affected by the lapse, release, or waiver exceeds the greater of the amount specified in 26 U.S.C. Section 2041(b)(2) and 26 U.S.C. Section 2514(e) or the amount specified in 26 U.S.C. Section 2503(b), on January 1, 2015.

643.
 (a) Except as otherwise provided in subdivisions (b) and (c), appointive property subject to a nongeneral power of appointment is exempt from a claim of a creditor of the powerholder or the powerholder’s estate.
(b) Appointive property subject to a nongeneral power of appointment is subject to a claim of a creditor of the powerholder or the powerholder’s estate to the extent that the powerholder owned the property and, reserving the nongeneral power, transferred the property in violation of Chapter 1 (commencing with Section 3439) of Title 2 of Part 2 of Division 4 of the Civil Code.
(c) If the initial gift in default of appointment is to the powerholder or the powerholder’s estate, a nongeneral power of appointment is treated for purposes of this chapter as a general power.

CHAPTER  6. Miscellaneous Provisions

645.
 In applying and construing the uniform provisions contained in this part, consideration shall be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.

646.
 This part modifies, limits, or supersedes the Electronic Signatures in Global and National Commerce Act (15 U.S.C. Sec. 7001 et seq.), but does not modify, limit, or supersede Section 101(c) of that act, 15 U.S.C. Section 7001(c), or authorize electronic delivery of any of the notices described in Section 103(b) of that act (15 U.S.C. Section 7003(b)).

647.
 (a) Except as otherwise provided in this part, on and after January 1, 2015, this part applies to all of the following:
(1) A power of appointment created before, on, or after January 1, 2015.
(2) A judicial proceeding concerning a power of appointment commenced on or after January 1, 2015.
(3) A judicial proceeding concerning a power of appointment commenced before January 1, 2015, unless the court finds that application of a particular provision of this part would interfere substantially with the effective conduct of the judicial proceeding or prejudice a right of a party, in which case the particular provision of this part does not apply and any superseded law applies.
(b) A rule of construction or presumption provided in this part applies to an instrument executed before January 1, 2015, unless there is a clear indication of a contrary intent in the terms of the instrument.
(c) Except as otherwise provided in subdivision (a) or (b), an action done before January 1, 2015, is not affected by this part.
(d) If a right is acquired, extinguished, or barred on the expiration of a prescribed period that commenced under law of this state other than this part before January 1, 2015, that law continues to apply to the right.