Section 2-608
(a)
In the absence of a requirement that a power of appointment be exercised by a reference, or by an express or specific reference, to the power, a general residuary clause in a will, or a will making general disposition of all of the testator's property, expresses an intention to exercise a power of appointment held by the testator only if (i) the power is a general power and the creating instrument does not contain an effective gift if the power is not exercised or (ii) the testator's will manifests an intention to include the property subject to the power.
(b)
Unless a contrary intent is manifested in the terms of an instrument creating or limiting a power of appointment, it shall be presumed that the person so creating or limiting such power intended to authorize the donee thereof, when exercising said power, not only to create absolute interests but also to create less than absolute legal and equitable interests, including interests in trust for the benefit of objects of said power even though the trustees thereof may not be objects of said power and including new powers of appointment, general or more limited, in objects of said power, even though the objects of the new powers may include one or more that are not objects of said power.
Comment
General residuary clause
This section, in conjunction with Section 2-601, provides that a general residuary clause (such as “All the rest, residue, and remainder of my estate, I devise to ....”) in the testator's will or a will making general disposition of all of the testator's property (such as “All of my estate, I devise to ....”) is presumed to express an intent to exercise a power of appointment held by the donee of the power only if one or the other of two circumstances or sets of circumstances are satisfied. One such circumstance (whether the power is general or nongeneral) is if the testator's will manifests an intention to include the property subject to the power. A simple example of a residuary clause that manifests such an intention is a so-called “blending” or “blanket-exercise” clause, such as “All the rest, residue, and remainder of my estate, including any property over which I have a power of appointment, I devise to ....”.
The other circumstance under which a general residuary clause or a will making general disposition of all of the testator's property is presumed to express an intent to exercise a power is if the power is a general power and the instrument that created the power does not contain a gift over in the event the power is not exercised (a “gift in default”). In well planned estates, a general power of appointment will be accompanied by a gift in default. The gift-in-default clause is ordinarily expected to take effect; it is not merely an after-thought just in case the power is not exercised. The power is not expected to be exercised, and in fact is often conferred mainly to gain a tax benefit – the federal estate-tax marital deduction under section 2056(b)(5) of the Internal Revenue Code or, now, inclusion of the property in the gross estate of a younger-generation beneficiary under section 2041 of the Internal Revenue Code, in order to avoid the possibly higher rates imposed by the new federal generation-skipping tax. See Blattmachr & Pennell, “Adventures in Generation Skipping, Or How We Learned to Love the ‘Delaware Tax Trap’”, 24 Real Prop. Prob. & Tr. J. 75 (1989). A general power should not be exercised in such a case without clear evidence of an intent to appoint.
In poorly planned estates, on the other hand, there may be no gift-in-default clause. In the absence of a gift-in-default clause, it seems better to let the property pass under the donee's will than force it to return to the donor's estate, for the reason that the donor died before the donee died and it seems better to avoid forcing a reopening of the donor's estate.
Cross reference
See also Section 2-704 for a provision governing the meaning of a requirement that a power of appointment be exercised by a reference (or by an express or specific reference) to the power.
Massachusetts comment
Current Massachusetts law, c. 191, § 1A(4), is consistent with the second UPC exception to the rule that a residuary clause does not exercise a power of appointment (where the donor did not specify a particular method of exercise). The first exception, where the donor of the power did not provide a gift in default of exercise, seems reasonable for the reason stated in the Comment.
Subsection (b) has been added to retain the presumption established by G.L. c. 191, § 1B.