What does "HEMS" mean?

This outline is intended to provide a general description of trust distribution standards. There is no “one size fits all” when it comes to trust distributions. A trustee is required to consider these standards in the context of the specific facts and circumstances of each case.

There are two general types of distribution standards. The first type is mandatory distributions. For example, a clause requiring distribution of “all the net income,” or “as each beneficiary attains the age of thirty-five (35),” is mandatory distribution language. The second type is discretionary distributions. For example, “the Trustee may pay to each beneficiary such sums as the Trustee deems advisable for his or her health, education, maintenance and support,” is discretionary distribution language.

Because discretionary distributions are dependent upon specific facts and circumstances, they are much more difficult to apply than mandatory distributions. A trust provision that includes health, education, maintenance and support language (HEMS) gives the trustee guidance in applying trustee discretion. Generally, the standard also requires the trust to give due consideration to “the best interests” of the beneficiary.

Health permissible expenses may include, but are not limited to, routine medical expenses (e.g., annual physicals, exams, medications, treatments), surgical procedures, hospitalization, nursing care, dental procedures, and psychiatric care. R. Hugh Magill, Exec. VP Northern Trust, Kansas City Est. Plan. Seminar, Kansas City, Mo., Discretionary Distribution Planning The Garment is Larger than its HEMS (April 23, 2021) (citing Restatement (Third) of Trusts § 50(2), cmts. d(2) and d(3) (Am. Law Inst. 1987)).

Education permissible expenses may include, but are not limited to reasonable tuition, room & board, textbook fees, transportation to/from school, tutoring, education-related travel (e.g., semester abroad), and reasonable spending money. Id. (citing Restatement (Third) of Trusts § 50(2), cmt. d(3) (Am. Law Inst. 1987)).

Maintenance permissible distributions relate to “maintaining the beneficiary’s standard of living,” and generally may include, but are not limited to, reasonable but not basic residential arrangements (down payment on a mortgage, mortgage payments, rent, real estate taxes and insurance, maintenance and repairs, etc.), transportation arrangements (car payments, taxes and insurance, maintenance and repairs, etc.), travel, entertainment, etc. But see id.

Support permissible distributions relate to financial support of the beneficiary, and generally may include, but are not limited to, assisting with the financial needs of a minor beneficiary or of a beneficiary who needs help supporting a minor beneficiary, basic living expenses, housing costs, medical expenses, transportation expenses, insurance premiums, etc. Id.

Questionable or inadvisable distributions may include, but are not limited to:

• Alternative medical treatments and unapproved drug/treatment regimens.
• Spa treatments and cosmetic surgery (except where medically justified).
• Graduate education, professional education, and continuing education.
• Distributions to increase the beneficiary’s personal estate.
• To allow the beneficiary to invest in a business.
• Funding extraordinary gifts.

These examples cannot be considered in a vacuum.  Many different facts and circumstances may interact with different results.  For example:

• What other resources does the beneficiary have access to?
• Does the trust have sufficient assets to satisfy current and future distributions?
• Has the trust’s or the beneficiary’s financial and/or tax advisor made reasonable recommendations?
• What are the rights of remainder or contingent beneficiaries?
• Is the distribution in the best interest of the beneficiary?
• What family dynamics and individual personality traits affect application of discretion?
• What are the general economic conditions affecting the trust assets and the beneficiary’s needs?
  • Should the beneficiary be providing for his/her own support and maintenance?
  • Should the Trustee require the beneficiary to provide a financial statement and budget?
  • How does the Uniform Principal and Income Act affect definitions of “income” and “principal” under the trust instrument?
    • Example: A capital gain upon the sale of a capital asset is generally allocated to “principal,” even though the IRA taxes it as “income.”
  • Does the trust instrument provide any specific terms which must or should be considered?
    • “A court ‘may not arbitrarily interfere, or control the discretion of the trustee granted him by the settlor, in the manner in which he shall discharge his duties.’” Wright v. Wright, No. 01-0108, 2002 WL 1071934 at * 3 (Iowa Ct. App. May 31, 2002) (unpublished opinion) (quoting In re Small’s Estate, 224 Iowa 1209, 1239, 58 N.W.2d 477, 492 (1953)).
  • Are there special assets which require special or “extraordinary” attention?
  • What are the tax implications of making or withholding distributions?
    • 2025 Example: A trust hits the highest income tax bracket (37%) at net income of $15,650.00; while an individual does not hit the 37% income tax bracket until net income of over $626,350.00 ($751,600.00 for married filing jointly). I.R.S. Form 1041-ES, Cat. No. 63550R (2025); I.R.S. Pub. No. 505, Cat. No. 15008E (Mar. 12, 2025), https://www.irs.gov/pub/irs-pdf/p505.pdf.