California Code of Regulations
Title 18 - Public Revenues
Division 2.5 - State Controller
Chapter 1 - Inheritance Tax
Article 4.4 - Powers of Appointment
Section 13693 - Limited Powers of Appointment

(a) Definition of "Limited Power of Appointment."

A limited power of appointment is defined in Revenue and Taxation Code Section 13693 as a power which does not qualify under Revenue and Taxation Code Section 13692 as a general power of appointment, i.e., a power under which a donee may not appoint to himself, his estate, his creditors or the creditors of his estate. For example, a limited power of appointment would include a power to appoint only to or among specified persons or designated classes of persons, not including the donee holder of the power, nor his estate, his creditors or creditors of his estate. A power of appointment may be general as to part of the appointive property and limited as to the rest. Thus, where the donor of the power transfers property to a donee for life and at the donee's death to be distributed, one-half to X, Y or Z as the donee by will directs, and one-half to any person as the donee may so direct, the donee has a limited power of appointment as to one-half and a general power as to the other half.

(b) Gifts of Limited Powers.

Under Revenue and Taxation Code Section 13694, a gift of a power of appointment is taxable to the donee of the power, no distinction being made between general or limited powers for this purpose (See Section 13694).

(c) Exercise of Limited Power of Appointment.

Except as hereafter indicated, the exercise or nonexercise of a limited power of appointment by a donee of the power is not taxable for inheritance tax purposes. An exception is made where the donor created the power in conjunction with a disposition of property effected before 5:00 p.m. of June 25, 1935 and died prior thereto. In such case the exercise thereafter by the donee of said power is taxed as a transfer from the donee to the person or persons appointed pursuant to the exercise. For this purpose only the exercise is taxable under Revenue and Taxation Code Section 13695. If such a limited power is not exercised it is not treated as a taxable transfer from the donee. The gift or creation of a limited power is taxable at the death of the donor as indicated under paragraph (b) above.

NOTE: Reference: Section 13693, Revenue and Taxation Code.