Also known as: gift in default · gifts in default · default gift
Written by attorneys · grounded in primary & secondary sources — see below
A clause in a donative instrument that identifies the persons who receive appointive property if a power of appointment is not effectively exercised. The clause supplies the disposition when the donee fails to make a valid appointment or when no appointment occurs.
Lena created a trust funded with startup shares and granted her brother Mark a general power of appointment. Mark's will attempted to appoint the shares to a space exploration club that never formed as a legal entity. With no gift-in-default clause in the trust, the shares pass to Mark's estate upon his death.
Victor created an irrevocable trust granting his niece Carla a presently exercisable general power over voting shares. Carla's will attempted to appoint the shares to a foreign nonprofit that was never formed. The trust named no takers in default, so the shares pass through Carla's estate rather than under any residuary clause in her will.
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The ineffectively appointed property passes to the donee or the donee's estate. This rule prevents reversion to the donor or the donor's successors when the donor provided no default takers.
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A residuary clause does not manifest an intent to exercise the power unless the power is general and the donor provided no effective gift-in-default clause. The clause therefore does not control the appointive property.
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The gift-in-default clause controls the disposition of the ineffectively appointed property to the extent the clause itself is effective. Only when the clause is absent or ineffective does the property pass to the donee or the donee's estate.
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…to be in substance gifts by the last tenant in tail at the time of expiration of his estate. The situation is also analagous to gifts in default of the exercise of a general power by deed or will, the period of perpetuities being computed from the expiration of the power— i. e. , the death of the donee.” There is no case, so far as…