HEMS: The Four Words That Make a Trust Work

A beneficiary asks the trustee for a new car. Not just any car — a $150,000 Porsche. The trust document says the trustee can pay for the beneficiary's "health, education, maintenance and support." Does that cover it?

That four-word phrase — HEMS, in estate planning shorthand — shows up in trusts everywhere, and it's doing more work than most people realize. It sounds simple. It's actually one of the most carefully calibrated tools in estate planning.

The answer is that HEMS provides something estate planners value tremendously: flexibility with guardrails.

What is an “ascertainable standard”? 

HEMS is commonly referred to as an ascertainable standard.  In simple terms, it gives a trustee a recognized framework for deciding when trust assets may be distributed to or for the benefit of a beneficiary.

The standard is intentionally broad.  It does not attempt to predict every need a beneficiary might have 10, 20 or 50 years from now.  Instead, it gives the trustee enough guidance to make reasonable decisions as circumstances change.

That flexibility is important because life rarely follows the plan we imagined when a trust was created.

The tax rules and court decisions surrounding HEMS have helped establish boundaries around the trustee's discretion.  When properly drafted, the standard can give a beneficiary meaningful access to trust assets while helping preserve important trust benefits, including protection from creditors and keeping the trust assets outside the beneficiary's taxable estate.  In other words, HEMS is designed to strike a balance: give the beneficiary access to the trust without giving the beneficiary complete control over it.

So what do the four words mean?

Health generally covers expenses necessary or appropriate to maintain or improve a beneficiary's physical or mental well-being.  Medical care, health insurance, prescriptions, dental care and therapy would generally fall comfortably within this category.

What about plastic surgery?  It depends.  Reconstructive surgery following an accident or surgery to correct a medical condition would generally fit comfortably within health.  Elective cosmetic surgery simply to change someone's appearance may be a more difficult question.

Education can be broad as well.  Tuition, books, supplies, tutoring and other educational expenses are obvious examples.  Depending on the circumstances, it could also include room and board while attending school, professional education, or other opportunities that meaningfully contribute to a beneficiary's education.

Maintenance generally refers to the beneficiary's accustomed standard of living.  It can include ordinary living expenses such as housing, food, clothing, transportation and other costs associated with maintaining an appropriate lifestyle.

Support is closely related to maintenance and generally covers the beneficiary's reasonable needs and expenses.  The two concepts overlap, which is one reason the phrase is so useful. Together, they give the trustee flexibility to respond to the beneficiary's circumstances rather than forcing every potential expense into a rigid category.

But HEMS does not mean “the trustee pays for everything.”  This is an important point.

A trustee applying a HEMS standard is not simply asking, “Would this be nice for the beneficiary?”  The trustee must consider whether the proposed distribution fits within the standard and whether making the distribution makes sense given the circumstances of the trust.

Take that Porsche request from the beneficiary we mentioned earlier. The beneficiary may argue they need a reliable car to commute to work, making the expense appropriate for maintenance or support. But the trustee has to consider the bigger picture: the size of the trust, the beneficiary's other resources, their accustomed standard of living, how long the trust needs to last, the needs of other beneficiaries, and the trust's overall purpose.

The question isn't just "Does a car fall within maintenance and support?" It's "Is a $150,000 Porsche appropriate under these circumstances?" A $150,000 vehicle looks very different when the trust holds $50 million than when it holds $2 million.

Why we like simple HEMS language

Estate planning attorneys sometimes have a tendency to over-engineer things.  We can imagine dozens of future circumstances and then try to write rules for each one.  But one of the strengths of HEMS is that we don't necessarily need to do that.

A simple provision saying that the trustee may distribute assets for a beneficiary's health, education, maintenance and support can provide a remarkable amount of flexibility.  It gives the trustee a framework while allowing future trustees to respond to circumstances that nobody could have anticipated when the trust was created.

That might mean paying for a grandchild's college education today, helping a beneficiary purchase a home 20 years from now, paying for medical care after an unexpected illness, or helping a beneficiary through a period when they cannot support themselves.  The trust does not need to predict which of those things will happen. It simply needs to give the trustee the right tools to respond when they do.

The goal: flexibility without giving up protection

A well-designed HEMS provision is a little like a good set of guardrails on a winding road.  The guardrails provide boundaries, but they don't dictate every turn.

That is the beauty of the ascertainable standard.

It can provide a beneficiary with meaningful access to wealth when they genuinely need it, while preserving the trustee's role and potentially maintaining important creditor protection and estate-tax benefits.

Most importantly, HEMS recognizes something fundamental about estate planning: we cannot know exactly what the future will look like.

Rather than trying to write a rule for every possible future circumstance, a well-drafted trust can provide a sensible framework and allow a thoughtful trustee to use judgment when the time comes.

Sometimes, the best estate planning is not about creating more rules . . .it is about creating the right amount of flexibility.

For complete list of disclosures, view Disclosures.