What are HEMS?
They are a part of our standard language. These control how money or things are given to people after someone passes away. It's a set of rules (terms) for making distributions from the Trust's Estate.
HEMS stands for health, education, maintenance, and support. This means that despite age-based or any other restrictions, the Trustee will have the power to provide financial support for adult beneficiaries or minors via their Guardian. (As long as there are liquid assets within the Trust to do so)
Health: Like going to the doctor, buying medicine, and maintaining a gym membership.
Education: Paying for tuition, studying abroad, books, a computer, or job training.
Maintenance and Support: Covering *regular costs like housing, food, monthly bills, and a family vacation. These are the things that might help the beneficiary maintain their lifestyle.
*Exclusions to HEMS might be distributions that may lead to wealth accumulation.
*i.e., Giving one beneficiary $1000/month to invest in the latest trending stock. This distribution could result in the beneficiaries receiving unequal shares. Not only did it deplete the assets available to other beneficiaries, but it also simultaneously reduced their ability to earn interest on the funds that were used elsewhere to benefit another beneficiary.
Here's an example of how it works:
Imagine you pass away and leave some money in a trust. The terms might say that anyone older than 35 should now receive their share of the assets. But if someone is younger than 35, the Trust will keep their share safe until they turn 35. During this time, the Trustees can use the money to help with health, education, living costs, and support. When the person turns 35, they can have the rest of the money.
Who is in charge of the HEMS Trust and its distributions?
The person who makes decisions regarding the Trust (Trustee) can choose how to distribute the money within the terms. They can decide what's essential for each person. The terms can be precise, spelling out exactly what the Trustee may spend money on, or more general, allowing the Trustee to decide. Decades of Estate Planning experience have taught us to utilize more general terms to empower your Trustee. Again, these are already in the language of our Revocable Living Trusts. The key to success is choosing a Successor Trustee that is financially savvy, works well under pressure, and is pragmatic. Someone that will buy your 16-year-old a used Camry for their first car instead of a new BMW.