188 / May a trust intended to qualify for the marital deduction as a “power of appointment trust” authorize the trustee to retain or acquire life insurance policies?

Under a “power of appointment trust,” the surviving spouse must be entitled for life to all of the income. This condition contemplates a trust holding income-producing property. Thus, if the trustee is empowered to retain or acquire non-income-producing property (such as life insurance), the condition probably will not be satisfied unless the trustee is required to make payments to the surviving spouse out of other trust assets to replace the lost income, or unless the trust gives the surviving spouse the power to compel the trustee to convert the non-income-producing property to income-producing property.¹