A "hanging" withdrawal right (a/k/a "hanging power") differs from an ordinary withdrawal right in the manner of its lapse. Like an ordinary withdrawal right, a hanging withdrawal right will generally be fully exercisable for 30 to 90 days. Unlike an ordinary withdrawal right, a hanging withdrawal right does not lapse completely at the expiration of the stated term; instead, it lapses only to the extent of the 5 & 5 amount (discussed above). The excess amount, if any, does not lapse until the following year (or later). Further, all lapses in a single calendar year are aggregated and must stay within the 5 & 5 limit.

For example, if a $10,000 gift was made to a trust in year 1 and the beneficiary had a 5 & 5 withdrawal right, $5,000 of his withdrawal right would lapse in year 1 and the remaining $5,000 would not lapse until the following year. If a second $10,000 gift was made in year 2, no portion of this second gift would lapse during year 2 because the first gift's lapse would have already exhausted the 5 & 5 limit on lapses in year 2. If this scenario repeated for several years the total amount subject to withdrawal could be substantial.

On the other hand, if (or when) the value of the trust becomes large enough or the donors stop making gifts to the trust, the lapses would catch up with the gifts and, eventually, the withdrawal rights would lapse completely. For instance, if a trust's only asset was a $1,000,000 life insurance policy insuring the life of the grantor, the 5 & 5 amount would probably be $5,000 during the grantor's life (assuming the cash value was $100,000 or less) but in the year of the grantor's death--when the $1,000,000 proceeds would be received--the 5 & 5 amount would increase to $50,000. As a result, the outstanding withdrawal rights would begin lapsing at a rate of $50,000 per year instead of $5,000 per year.