Have you wondered what your attorney means when they refer to a HEMS standard but you did not ask? Often a trust will contain language that limits a Trustee’s ability to give money to a beneficiary and contains the words “health, education, maintenance, and support,” or HEMS. But what exactly is HEMS and what does it mean?
HEMS is an ascertainable standard for distribution, which means it provides boundaries or rules for a Trustee when he or she is deciding what distributions are appropriate from a Trust. This creates a balance between the possibility of extravagant distributions and providing for the beneficiary’s needs. A standard like HEMS removes the arbitrary decision making that can come with a broad distribution power. Some examples of what a Trustee may pay for include, but are not limited to:
Health – Medical Treatment, Gym membership, psychiatric treatment, routine heath exams, insurance, dental work, eye exams and care, and alternative medical treatments.
Education – college, technical school, career training, study abroad, housing, dining hall or other food expenditure, books, other expenses that support the beneficiary during schooling or training.
Maintenance and Support – mortgages or rent, taxes, insurance, accustomed vacations, family gifting, reasonable comforts. Generally, this standard is seen to provide a reasonable level of comfort in a style of living the beneficiary is already accustomed to. Example of payments that are not allowed include: distributions that contribute to the beneficiary’s happiness or that enlarge a beneficiary’s estate (wealth accumulation).
Additionally, limiting the Trustee to the HEMS standard helps to prevent any assets from being included in a divorce proceeding or lawsuit. Setting distribution standards protects the Trustee and the beneficiary while still providing enough discretion to provide for the beneficiary. If you have a Trust that contains HEMS language, or if you are thinking of creating a trust with these protections, come in and let us have a conversation on what HEMS standards mean for you.
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This Blog/Web Site is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide legal advice. By using this blog site you understand that there is no attorney client relationship between you and Grissom Law, LLC.