Eligibility
Applies to powers of appointment created after October 21, 1942, where exercise requires joinder of an adverse party.
Frequently Asked Questions
Who is eligible for the Adverse Party Joinder Exclusion?
Applies to powers of appointment created after October 21, 1942, where exercise requires joinder of an adverse party.
How does the Adverse Party Joinder Exclusion work?
Require the consent of a person with a substantial adverse interest before exercising a power of appointment to avoid the power being treated as a general power of appointment.
What law authorizes the Adverse Party Joinder Exclusion?
The Adverse Party Joinder Exclusion is authorized under IRC §2514(c)(3)(B) of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §2514
Source: Internal Revenue Code, Title 26, United States Code
§ 2514. Powers of appointment(a) Powers created on or before October 21, 1942An exercise of a general power of appointment created on or before October 21, 1942, shall be deemed a transfer of property by the individual possessing such power; but the failure to exercise such a power or the complete release of such a power shall not be deemed an exercise thereof. If a general power of appointment created on or before October 21, 1942, has been partially released so that it is no longer a general power of appointment, the subsequent exercise of such power shall not be deemed to be the exercise of a general power of appointment if—(1) such partial release occurred before November 1, 1951, or
(2) the donee of such power was under a legal disability to release such power on October 21, 1942, and such partial release occurred not later than six months after the termination of such legal disability.
(b) Powers created after October 21, 1942The exercise or release of a general power of appointment created after October 21, 1942, shall be deemed a transfer of property by the individual possessing such power.
(c) Definition of general power of appointmentFor purposes of this section, the term “general power of appointment” means a power which is exercisable in favor of the individual possessing the power (hereafter in this subsection referred to as the “possessor”), his estate, his creditors, or the creditors of his estate; except that—(1) A power to consume, invade, or appropriate property for the benefit of the possessor which is limited by an ascertainable standard relating to the health, education, support, or maintenance of the possessor shall not be deemed a general power of appointment.
(2) A power of appointment created on or before October 21, 1942, which is exercisable by the possessor only in conjunction with another person shall not be deemed a general power of appointment.
(3) In the case of a power of appointment created after October 21, 1942, which is exercisable by the possessor only in conjunction with another person—(A) if the power is not exercisable by the possessor except in conjunction with the creator of the power—such power shall not be deemed a general power of appointment;
(B) if the power is not exercisable by the possessor except in conjunction with a person having a substantial interest, in the property subject to the power, which is adverse to exercise of the power in favor of the possessor—such power shall not be deemed a general power of appointment. For the purposes of this subparagraph a person who, after the death of the possessor, may be possessed of a power of appointment (with respect to the property subject to the possessor’s power) which he may exercise in his own favor shall be deemed as having an interest in the property and such interest shall be deemed adverse to such exercise of the possessor’s power;
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