The HEMS Standard: What It Means and Why It Matters in a Trust
- Robert P. Newman, Esq.
- Oct 15
- 2 min read
If you have ever worked with a trust or are considering setting one up, you may have come across the term “HEMS.” It is not a typo or an obscure legal acronym. Instead, it is a foundational concept in estate planning that provides clarity for trustees, offers protection for beneficiaries, and carries important tax implications. Let us take a closer look.
What Does HEMS Stand For?
HEMS stands for Health, Education, Maintenance, and Support. It is a standard often used in trusts to guide how and when trustees may distribute funds to beneficiaries. When a trust includes the HEMS standard, the trustee is authorized to make distributions only if the funds are used for the beneficiary’s health, education, maintenance, or support.
The Purpose of HEMS
The HEMS standard serves two primary purposes:
Guidance for Trustees - Without a clear standard, trustees may struggle to determine whether a distribution is appropriate. HEMS provides a defined framework that helps trustees make consistent and responsible decisions.
Tax Protection - If a beneficiary is also serving as the trustee (for example, an adult child), giving that person unlimited discretion over the trust could result in the IRS including the trust’s assets in that individual’s taxable estate. The HEMS standard limits that discretion, which helps keep trust assets outside of the beneficiary’s estate for tax purposes.
Practical Examples of HEMS Distributions
Let us imagine you have created a trust for your daughter, and she is also the trustee. Under the HEMS standard, she may use trust funds for the following:
Health: Medical expenses, therapy, health insurance premiums, prescription medications, or even a gym membership recommended by a doctor.
Education: Tuition, books, supplies, room and board, and continuing education programs.
Maintenance: Rent, mortgage payments, car repairs, or utilities that help maintain her current lifestyle.
Support: Reasonable living expenses, especially during life transitions such as a career change or time spent raising children.
What would typically not qualify? Luxury vacations, designer clothing, or speculative investments—unless they can be directly tied to one of the HEMS categories, which is rare.
Why HEMS Benefits the Trust
Including the HEMS standard in a trust creates a thoughtful balance. It:
Provides flexibility for trustees to meet the beneficiary’s genuine needs.
Prevents abuse by placing reasonable limits on distributions.
Preserves the trust’s integrity for future generations.
Offers tax advantages by reducing the risk that trust assets will be counted in the trustee-beneficiary’s estate.
The HEMS standard also offers protection in legal disputes. Courts and tax authorities are more likely to uphold the trust’s structure and intentions when it includes clear distribution guidelines.
Final Thoughts
Understanding the HEMS standard is essential whether you are creating a trust or serving as a trustee. It brings clarity, promotes fairness, and helps maintain the trust’s tax-favored status. Although it consists of just four words—health, education, maintenance, and support—HEMS is a powerful tool in building a secure and responsible estate plan. Call us today at 301.892.2713 or click here to schedule a complimentary Discovery Session to discuss how we can give you and your loved ones some peace of mind.
"Living with Your Bags Packed!"®
*********************
This article is for educational purposes only and should not be considered legal advice.