Anyone interested in estate planning needs to be aware of the HEMS standard. This standard is used to guide trustees regarding when and how to release funds to beneficiaries.
Including HEMS trust language in trusts offers greater control over how assets are spent, which can be useful for cases where beneficiaries are either young or financially inexperienced.
What Are HEMS Provisions?
The HEMS definition is short for health, education, maintenance, and support. A HEMS provision indicates that assets are to be distributed only for purposes related to these specific needs.
Examples of when a trustee would release assets could include school tuition, rent payments, or health insurance premiums. Reasonable comforts tend to be covered under the “support” provision of the HEMS standard, as well.
Ultimately, the trustee has discretionary authority regarding what expenses qualify and how to distribute assets. In some cases, as with health and education, it should be obvious. Maintenance and support, however, can be far more ambiguous. Some interpret them as allowing beneficiaries to maintain previous standards of living, rather than providing a basic standard of care.
When that’s the case, things like travel and vacation expenses could be covered along with mortgage payments.
HEMS Standard Examples
Health
- Medical treatments
- Health insurance
- Eye & Dental care
- Prescription medication
- Gym memberships
Support
- Education tuition
- College housing, dining, and supplies
- Career planning
- Study abroad opportunities
Maintenance & Support
- Housing (mortgage, rent)
- Taxes
- Insurance
- Vacations
- Family gifts
- Comforts within reason
The Benefits of Including the HEMS Standard
The most obvious benefit of including a HEMS provision is that it limits the types of distributions allowed to better ensure that the trust’s assets do not get spent frivolously. Establishing restrictions decreases the odds of the trust being drawn down quickly, especially if the trustee is also one of the beneficiaries.
Giving the trustee guidance regarding how assets should be distributed also makes their job easier. HEMS provisions narrow down the discretionary authority that many trusts endow, allowing trustees to preside over them without having to make constant, difficult decisions.
Finally, HEMS trusts can be tailored to the situation. Some provisions are very specific, while others are broad. Some grantors give trustees full discretion, but most include at least some stipulations regarding when the assets can be distributed.
HEMS Trusts in Estate Planning
Following HEMS standards doesn’t just make a trustee’s job easier and ensures that a grantor’s wishes are followed as closely as possible. It can also materially improve the life of the beneficiaries, especially if they are too young to be able to make sound financial decisions for themselves.
Limiting distributions to only those that are covered under the HEMS provision means that beneficiaries will not be able to draw down their trusts too quickly and will continue to have access to the money they need to support themselves for a longer period.
Hire an Estate Planning Attorney for Your HEMS Standard Trust
Forming a trust is never a job to be undertaken without professional help, regardless of whether or not it includes HEMS provisions.
Those who want to ensure that their assets are distributed properly to the intended beneficiaries for the right reasons following their deaths need to work with estate planning attorneys.
When an estate planning attorney drafts a trust, it will always meet state standards and include the appropriate language for ensuring both grantors’ and beneficiaries’ best interests.