Limits trustee discretion to health, education, maintenance, and support.
In short. A HEMS standard limits the trustee's discretion to distributions for the beneficiary's health, education, maintenance, and support. Federal tax law treats HEMS as an ascertainable standard that avoids inclusion of the trust in the trustee's own estate when the trustee is also a beneficiary.
HEMS — health, education, maintenance, and support — is the most common distribution standard in estate planning. Each category has decades of regulatory and case-law gloss. Health covers medical, dental, and mental health care. Education covers tuition, room and board, and reasonable related expenses. Maintenance and support overlap and cover the beneficiary's accustomed standard of living.
Families include a HEMS standard because it lets the trustee respond to real-world needs without writing a blank check. It also has a useful tax property: when a beneficiary serves as their own trustee, a HEMS-limited power to distribute is not treated as a general power of appointment for estate tax purposes, so the trust is not pulled back into the beneficiary's estate.
HEMS is a federal tax concept, not an Arizona-specific one, but Arizona's Trust Code recognizes ascertainable standards and treats them as enforceable against the trustee. Arizona courts will second-guess HEMS distributions only on abuse-of-discretion grounds when the trustee acts in good faith within the standard.
Documents that include a HEMS standard typically contain language along these lines: "The trustee shall distribute as much of the income and principal as is necessary for the beneficiary's health, education, maintenance, and support in the beneficiary's accustomed standard of living." Descriptive only.
The most common failure is the beneficiary-trustee distributing for purposes outside HEMS, which can collapse the tax benefit and pull the trust back into their estate. A second failure is the trustee treating HEMS as a license to fund every wish, which can deplete the trust faster than the family intended. A third pitfall is failing to define the beneficiary's accustomed standard of living, which leaves the trustee guessing at what counts as maintenance.
This page describes how this clause works in general terms. It is not legal advice and not a drafting template. Whether a clause like this belongs in your plan depends on your family, your assets, and your goals. Drafting is performed by partner attorneys we work with.
Gives the trustee absolute discretion over whether to distribute.
Blocks creditors and prevents beneficiaries from assigning their interest.
Sweeps stray assets from the will into the living trust at death.
Sets the order in which successor trustees take over.