The donor of a power of appointment cannot nullify or alter the rights given creditors of the powerholder by Sections 682, 683, and 684 by any language in the instrument creating the power.
Powers of AppointmentRights of Creditors
Section § 680
This law states that if someone grants another person the authority to manage or distribute property (called a power of appointment), they cannot change or cancel the rights of creditors to seek repayment from the person who holds this power. The rights of these creditors are protected, regardless of what the power grantor might say in the document that gives the power.
power of appointment donor of power powerholder rights
Section § 681
This law focuses on the property covered by a special power of appointment, explaining when it can or cannot be claimed by creditors. Generally, such property is protected from the creditors of the person holding the power or from being used to cover expenses when that person passes away. However, there are exceptions: if the person misused the property by transferring it in a way that violates the Uniform Voidable Transactions Act, or if the property automatically goes to the person or their estate when the special power is not exercised, it can be accessed by creditors.
(a)CA Probate Code § 681(a) Except as provided in subdivision (b), property covered by a special power of appointment is not subject to the claims of creditors of the powerholder or of the
powerholder’s estate or to the expenses of the administration of the powerholder’s estate.
(b)CA Probate Code § 681(b) Property subject to a special power of appointment shall be subject to the claims of creditors of the powerholder or of the powerholder’s estate or the expenses of administration of the powerholder’s estate under either of the following circumstances:
(1)CA Probate Code § 681(b)(1) To the extent that the powerholder owned the property and, reserving the special power, transferred the property in violation of the Uniform Voidable Transactions Act (Chapter 1 (commencing with Section 3439) of Title 2 of Part 2 of Division 4 of the Civil Code).
(2)CA Probate Code § 681(b)(2) If the initial gift in default of the exercise of the power is to the powerholder or the powerholder’s
estate.
special power of appointment creditors claims estate administration expenses
Section § 682
This law explains what happens when someone who has control over certain property, called a powerholder, doesn't have enough assets to pay their debts. If they have a special authority to decide who gets certain property, known as a general power of appointment, that property can be used to pay their creditors just like if they owned it outright.
When the powerholder passes away and their estate doesn't have enough to pay off all debts and administrative expenses, this property is also available to cover those costs. This is true whether or not the powerholder actually used their power to decide who would receive the property.
(a)CA Probate Code § 682(a) To the extent that the property owned by the powerholder is inadequate to satisfy the claims of the powerholder’s creditors, property subject to a general power of appointment that is presently exercisable is subject to the claims to the same extent that it would be subject to the claims if the property were owned by the
powerholder.
(b)CA Probate Code § 682(b) Upon the death of the powerholder, to the extent that the powerholder’s estate is inadequate to satisfy the claims of creditors of the estate and the expenses of administration of the estate, property subject to a general testamentary power of appointment or to a general power of appointment that was presently exercisable at the time of the
powerholder’s
death is subject to the claims and expenses to the same extent that it would be subject to the claims and expenses if the property had been owned by the powerholder.
(c)CA Probate Code § 682(c) This section applies whether or not the power of appointment has been exercised.
powerholder general power of appointment creditors claims
Section § 683
This law states that if someone (the donor) has the power to decide who will receive certain property, and they could potentially choose themselves, that property can be claimed by the donor's creditors or used to pay off the costs of managing the donor's estate after they pass away. However, if the donor has already made an unchangeable decision to give that property to someone else, the creditors or estate cannot claim it.
Property subject to a general power of appointment created by the donor in the donor’s favor, whether or not presently exercisable, is subject to the claims of the donor’s creditors
or the donor’s estate and to the expenses of the administration of the donor’s estate, except to the extent the donor effectively irrevocably appointed the property subject to the general power of appointment in favor of a person other than the
donor or the donor’s estate.
general power of appointment creditors' claims estate administration expenses
Section § 684
This law states that if someone has a legal duty to financially support another person, the person who is supposed to receive that support is legally considered a creditor of the one providing support. This means the person owed support has a claim similar to a creditor’s right to collect what is due.
For the purposes of Sections 682 and 683, a person to whom the powerholder owes an obligation of support shall be considered a creditor of the powerholder to the extent that a legal obligation exists for the powerholder to
provide the support.
obligation of support powerholder creditor rights
