A woman dies leaving a will that creates two trusts. She gives her husband a testamentary power to appoint the property in his trust to his estate upon his death. If he fails to exercise the power, the property passes to their daughter’s trust. Years later, the husband dies. His will contains a general statement about intending to dispose of all property including “any property over which I may have a power of appointment.” The residuary clause leaves everything to a trust he created with his second wife. The daughter claims her father never properly exercised the power of appointment. The second wife argues the will’s language was sufficient.
This presents a question that has come up time and time again. Powers of appointment allow property owners to give others flexibility in directing how property will ultimately be distributed. However, the donee of the power must exercise it properly or the property passes according to the donor’s default provisions. The challenge lies in determining what language sufficiently demonstrates intent to exercise a power of appointment.
Does a general reference to powers of appointment combined with a residuary clause constitute a valid exercise of a specific power? The Fourteenth District Court of Appeals’ decision in Wright v. Greenberg, 2 S.W.3d 666 (Tex. App.—Houston [14th Dist.] 1999, no pet.), addresses this question and demonstrates the strict requirements Texas courts apply when determining whether a donee effectively exercised a testamentary power of appointment.
Facts & Procedural History
Lurine was Jacob’s first wife. She died in 1975. Their daughter was Karon, also known as Abby. In her last will and testatment, Lurine left all of her residuary estate to Jacob in trust. She directed him to divide the trust estate equally between the Jacob Greenberg Trust and the Abby Greenberg Rosenfield Trust.
By the terms of her will, Lurine named Jacob the trustee and beneficiary of the Jacob Greenberg Trust. She named Jacob the trustee of the Abby Greenberg Rosenfield Trust. Jacob was given discretionary power to distribute the trust income and corpus of Karon’s Trust to Karon in such amounts as he believed were in Karon’s best interests. Upon Jacob’s death, Lurine’s will appointed Karon as successor trustee of Karon’s Trust.
Lurine’s will gave Jacob “the power to appoint the entire remaining principal of Jacob’s Trust, free of the trust, by will, irrespective of the time of his death, in favor of his estate.” Should Jacob fail to exercise that power, Lurine’s will provided that the remaining principal of Jacob’s Trust passed to Karon’s Trust with Karon as successor trustee.
Jacob died in 1995. His will named his second wife Joyce as independent executrix. Jacob’s will provided: “By this Will, I intend to dispose of all my property (that owned by me and that over which I have any power of disposition), real, personal and mixed, of whatever kind and wherever situated, including any property over which I may have a power of appointment.”
In the residuary clause of Jacob’s will, he left all of the “rest, residue and remainder” of his estate to the trustee or successor trustee of the Jacob Greenberg Family Trust created in 1988. After Jacob died and his will was admitted to probate, Karon sued Joyce for an accounting of both trusts, damages for Jacob’s alleged mishandling of the trusts, a declaratory judgment that Jacob’s will was not a valid exercise of the power of appointment, and an order that the corpus of Jacob’s Trust be turned over to Karon as successor trustee.
Joyce filed a motion for partial summary judgment alleging that Jacob’s will effectively exercised the power of appointment given to him under Lurine’s will as a matter of law. Karon responded alleging that Jacob’s will did not specifically refer to the power of appointment in Lurine’s will, nor did it refer to the property subject to the power of appointment. Furthermore, Jacob’s will did not dispose of the property over which he had a power but only stated his “intention” to dispose of property over which he had a power.
The trial court granted Joyce’s first motion for partial summary judgment on the ground that she established as a matter of law that Jacob’s will exercised his testamentary power of appointment. The trial court also granted Joyce’s second motion for partial summary judgment on limitations grounds. Both summary judgments were made final and severed for purposes of appeal. Karon appealed.
The Legal Standard for Exercising a Power of Appointment
A power of appointment is a power of disposition given to a person over property not his own by someone who directs the mode in which that power shall be exercised by a particular instrument. It is an authority to do an act which the owner granting the power might himself lawfully perform.
To constitute a valid exercise of a power of appointment, the Texas Supreme Court stated the general rule in Republic National Bank of Dallas v. Fredericks, 283 S.W.2d 39 (Tex. 1955): “In order for a will or deed to constitute the exercise of a power of appointment the intent to exercise such power must be so clear that no other reasonable intent can be imputed under the will.”
The will must meet at least one of three requirements. It must refer to the power of appointment. It must refer to the property subject to such power. Or the donee of the power must have owned no other property to which the will could have attached such that the will would have been a vain and useless thing except it be held to be an exercise of the power.
If from the circumstances or the instrument executed it is doubtful whether it was the intention to execute the power possessed by the grantor, then it will not be held that by such act or conveyance that power was in fact executed.
In Republic, A.C. Ebie’s will left part of a trust estate “to the legatees and devisees of my said son, in accordance with his last will and testament, if he shall leave a will.” The will of Ebie’s son Russell contained no reference to the power of appointment given under his father’s will but left his wife all of his property in fee simple. The supreme court found no reference in the will to the power of appointment, no language stating the will was exercising such power, no reference to the father’s estate, and Russell did have property of his own separate from his interest in his father’s estate given by the power. Therefore, Russell’s will did not exercise the power of appointment.
The Majority’s Application of the Law
Construction of a trust instrument is a question of law for the trial court when no ambiguity exists. If the court can give a certain or definite legal meaning or interpretation to the words of an instrument, it is unambiguous and the court may construe it as a matter of law. If the meaning is uncertain or reasonably susceptible to more than one meaning, it is ambiguous and presents a fact issue precluding summary judgment.
Under the Republic test, the will must refer to the power of appointment or to the property subject to such power, or the donee must have owned no other property to which the will could have attached. Jacob’s will expressly stated that he intended to dispose of all of his property by his will, including “any property over which I may have a power of appointment.”
Based on Section 37 of the Texas Probate Code, Jacob was vested with the power of appointment granted to him in the will immediately upon Lurine’s death. Therefore, Jacob could and did exercise that power by his will. Section 37 provides: “When a person dies, leaving a lawful will, all of his estate devised or bequeathed by such will, and all powers of appointment granted in such will, shall vest immediately in the devisees and legatees of such estate and the donees of such powers.”
Karon contended that Jacob’s declaration whereby he stated he intended to dispose of all of his property made no disposition of the property. She contended such a declaration was precatory boilerplate language without a direction as to distribution. The court disagreed.
All rules of construction must yield to the basic intention and purpose of the testator as reflected by the entire instrument. The intent of the testator must be ascertained from the language used within the four corners of the instrument. In the absence of ambiguity, courts must construe the will based on the express language used. The court must determine what the testator meant by what he actually said, giving the words used their common and ordinary meaning absent a contrary expression in the will.
The court found that Jacob clearly was referring to the power of appointment vested in him by Lurine’s will when he stated “any property over which I may have a power of appointment” in his will. In his will, Jacob made specific bequests of his residence and tangible personal property to Joyce. He then transferred the “rest, residue and remainder of my estate” of “every kind, character and description” to the trustee of the Jacob Greenberg Family Trust.
The court relied on Krausse v. Barton, 430 S.W.2d 44 (Tex. Civ. App.—Houston [1st Dist.] 1968, writ ref’d n.r.e.), where the court of appeals found that the testator intended that the appointive estate become part of her residual estate and that it was to pass to her executor under the terms of her will. Having found that Jacob did exercise the power of appointment, the court held that by the terms of his will, Jacob intended that his appointive estate become part of his residual estate and that the appointive estate under Lurine’s will passed to the trustee of the Jacob Greenberg Family Trust.
The Dissenting Opinion’s Concerns
Justice Frost dissented from the majority’s finding that Jacob exercised the power of appointment. The dissent argued that the standard set forth in Republic is simple and straightforward, yet the language in Jacob’s will does not pass the test even when pieced together from unrelated sections.
The only mention of a power of appointment in Jacob’s will was not in the context of an exercise of that power but in a general introductory section that lacked any appointive language. The mere inclusion of the generic words “power of appointment” in the introductory section should not be elevated to an exercise of a specific power, especially where the identity of the appointee is missing and must be supplied by reference to an entirely different part of the will.
The dissent emphasized three problems with the majority’s analysis. First, there was no appointive language. Nowhere in his will did Jacob use words of appointment clearly or unclearly. The word “intend” as used in Article 1 indicated an expectation or contemplation rather than a specific undertaking. Jacob never again mentioned the power of appointment, directly or indirectly, nor did he issue any directives to carry into effect any notion he might have had to exercise the power.
Second, the language was ambiguous and incongruous. Jacob’s reference to “my property” in Article 1 and to “my estate” in Article 4 could not be overlooked in determining his intent. As a matter of law, a power of appointment is not property but a mere right or power. The property subject to the power did not belong to Jacob or his estate. For this reason, the residuary clause disposing of “the rest, residue and remainder of my estate” could not be construed to include any property subject to the power of appointment.
Third, there was no language identifying an appointee or connecting the power of appointment to the residuary estate. The residuary clause in Article 4 disposed of Jacob’s property not otherwise bequeathed in his will. It did not mention the power of appointment or the property subject to the power. Unlike the will in Krausse, there was nothing in Jacob’s will to provide a nexus between the power of appointment and the residuary estate.
The dissent concluded that it could not be said that Jacob’s intent to exercise the power was “so clear that no other reasonable intent can be imputed under his will.” The presence of doubt in and of itself was sufficient under Republic to preclude any finding of an exercise of the power of appointment.
The Takeaway
The Wright v. Greenberg decision demonstrates the tension between strict requirements for exercising powers of appointment and courts’ attempts to effectuate testators’ intentions. The majority found that a general reference to powers of appointment in an introductory clause combined with a residuary clause leaving everything to a trust was sufficient to constitute an exercise of a specific power of appointment granted in another will. The case illustrates the importance of using precise language when exercising powers of appointment, as even sophisticated estate planning documents can fail to meet the strict standards Texas courts apply. Testators who hold powers of appointment should specifically refer to the power being exercised, identify the property subject to the power, and clearly designate the appointee rather than relying on general statements of intent and residuary clauses.
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