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14. BEALS v. STATE STREET BANK & TRUST CO. Supreme Judicial Court of Massachusetts, 1975, 367 Mass. 318, 326 N.E.2d 896
1. Fact
Arthur Hunnewell died in 1904 in Massachusetts, leaving a will placed the residue of his property in trust, the income of which was to be paid to his wife during her life. Upon his wife’s death, the trust was divided to her daughters. Isabella, one of her daughters, requested transfer her trust share to her husband’s family office. The Hunnewell trustee granted but retrained a small portion of her share which Isabella did not want in kind and which the trustee could not sell at a reasonable price at the time. Isabella filed a probation in New York, where she lived, and partially released her general power of appointment under the will of her father. Isabella died and left her will; she did not expressly exercise her power of appointment for the interest and the proceeds from her residual share under her father’s will. According to her will, the residue would be distributed to her sister Blake per stripes and if Isabella exercised her power of appointment. The trustee of Hunnewell trust filed a petition seeking a termination of the proper distribution of the trust created under the residual clause of donor’s will. The Probation Court reported the case to the Appeals Court. The case was transferred to The Supreme Judicial Court.
2. Issue
Whether a donee did exercise the power of appointment under donor’s will when the donor’s domicile and the donee’s domicile is different and the donor released the power of appointment partially and voluntarily.
3. Rules
1) Lane v. Lane, 4 Pennewill 368, 378 (Del. 1903)
Most courts in this country interpret the donee's will under the law governing the administration of the trust, which is usually the law of the donor's domicil.
2) Fiduciary Trust Co. v. First Natl. Bank, supra, at 6-10; the canon of construction applicable to general powers of appointment
A general power was said to be a close approximation to a property interest, a "virtually unlimited power of disposition", while a special power of appointment lacked this quality.
The donee of a special power would not reasonably regard such appointive property as his own: "[h]e would more likely consider himself to be, as the donor of the power intended, merely the person chosen by the donor to decide who of the possible appointees should share in the property (if the power is exclusive), and the respective shares of the appointees”
4. Application
1) Application of Massachusetts law
Generally, the law of the donor’s domicile is applied in interpreting the donor’s will. However, the Court stated that the substantive law of the jurisdiction whose law governs the administration of the trust should be applied for certainty and consistency.
2) The Donor’s intention
The Court concluded that Isabell’s intention cannot be determined whether she exercised the power of appointment under her father’s will. However, the residuary clause of Isabella's will should be presumed to have exercised the power of appointment.
3) the power of appointment
The Court stated that the general residuary clause was executed means that she executed a general testamentary power. In addition, the Court noted that she enjoyed and used the property of her trust and voluntarily limited the power by selecting the possible appointees. Thus, the Court concluded that Isabella exercised the general power of appointment since she treated the property as her own.
5. Conclusion
The Court ordered the testamentary disposition of all of the donee’s property under her will.
6. Feedback
* power of appointment
Power of appointment traces its origins back to British common law. It is the legal authority to make another person the outright owner of the property left by a decedent. A donor gives the power to a donee so that person may choose the beneficiaries of their trust or will. Most commonly found in wills, the holder of the power of appointment has the ability to divide up the testator’s estate between the beneficiaries.
The donor can either grant the donee a general power of appointment, where the donee has full discretion as to who the property should be divided among, or a special power of appointment where the list of potential beneficiaries is subject to a set of limitations. In the event a donee chooses not to exercise their power of appointment, the property will be distributed to the takers in default.
* Residuary clause
"All the rest, residue and remainder of my property of whatever kind and wherever situated (including any property not effectively disposed of by the preceding provisions of this my will and all property over which I have or may have the power of appointment under or by virtue of the last will and testament dated November 27, 1933 and codicils thereto dated January 7, 1935 and January 8, 1935 of my husband, the late Gordon Dexter) ... I devise, bequeath and appoint in equal shares to such of my said nephew GEORGE BATY BLAKE and my said nieces MARGARET CABOT and JULIA O. BEALS as shall survive me and the issue who shall survive me of any of my said nephew or nieces who may predecease me, such issue to take per stirpes."
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