IHTM04460 - Estate Duty surviving spouse exemption: powers exercisable by will or by deed

In considering whether the deceased had a general power of appointment that would make them competent to dispose of the settled property, it is necessary to distinguish between a power exercisable by will and one exercisable by deed. An appointor cannot by will appoint property to themselves personally. They are not regarded as competent to dispose of it merely because under the terms of a limited power they can so appoint property by will as to make it liable for their debts. Any limitation on the objects in favour of whom a power by will alone can be exercised will render the appointor not competent to dispose of the property.

To the extent that a power of appointment is exercisable by deed, the appointor is regarded as competent to dispose if they are able to appoint to themselves (Re Penrose [1933] Ch 793), but not otherwise.

In the case of a power exercisable by deed or will, you will need to consider both aspects.

In each of the following situations, the appointor is empowered to appoint to themselves by deed, and is therefore competent to dispose by deed (they are not competent to dispose by will, unless the persons excepted from the objects of the power predecease them)

• property held on trust for such persons, other than the deceased’s spouse, as the deceased should by deed or will appoint,
• property held on trust for such persons, other than the deceased’s spouse or any of his/her relatives or nominees except their children, as the deceased should by deed or will appoint. (The deceased themselves would not be regarded as a relative of his/her spouse for this purpose.)

Where property held on trust for such persons, other than the deceased, as they should by deed or will appoint, the appointor is competent to dispose by will but not by deed. They are competent to dispose by will because, when the power takes effect on their death, it is unfettered. The same would be true if other objects excepted from the power exercisable by will had predeceased the appointor, with the result that the power was not in fact subject to any limitation on the appointor’s death.