In a recent case, the Massachusetts Appeals Court reviewed whether a testator may grant property while reserving to herself a power of appointment over the same property.
Background:
Skye v. Hession involved a testator who granted her home to her three daughters and her son-in-law in equal shares, while reserving for herself a life estate, which allowed her to live in the home while she was alive. The testator’s intent in doing this was to avoid certain “spend-down” provisions or lien provisions of MassHealth, the Massachusetts Medicaid program, which currently has a “look-back” period of five years.
In the deed, the testator also reserved for herself a special power of appointment. This allowed her to appoint the property to any person except herself, her creditors, her estate, or her estate’s creditors. This option was exercisable by either deed or will.
Two years later, the testator executed a new will. In it, she decided that her daughters and son-in-law should receive unequal shares of her property. She left one daughter (the plaintiff in the case) 5% of the property, reducing her share by exercising her power of appointment. The daughter sued, claiming that the power of appointment in the original deed was improper and void.
Appeals Court Decision:
Ultimately, the Appeals Court sided with the defendants. It did, however, acknowledge the plaintiff’s argument regarding the invalidity of the power of appointment. “We acknowledge the existence of some apparent tension between the grant of the remainder interests and the reservation of the power,” the Court noted. “The former granted the parties a present ownership interest, but the latter permitted Margaret to effectively terminate or alter those interests by exercise of the special power of appointment.”
The Court explained that interests are considered repugnant to one another where a grant of property includes two different conditions; that is, the fulfillment of one breaches the other. However, the Court explained, that was not the case here. Because the testator reserved for herself the power of appointment, she did not grant a fee simple absolute. A fee simple absolute is a grant with no limitations. Instead, she granted a fee simple defeasible, which is a lesser estate.
Rationale:
“Because of the reservation of the life estate, the deed conveyed not present possessory estates but rather remainder interests; and, because of the reservation of the power, the remainder interests were defined, in part, by this limitation, and they were in the nature of fees simple defeasible,” the Court held. “Had the deed merely reserved to [the testator] a life estate, this, of course, would have been the case. Here, the additional reservation of the power of appointment resulted in a grant of a lesser estate.”
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