- You want structured access.
- A child may serve as trustee.
- You want tax efficiency.
- You want protection but also reasonable predictability.
- You prefer defined guardrails.
When Is a Fully Discretionary Trust Appropriate?
- Asset protection is the highest priority.
- There is concern about spending behavior.
- The beneficiary may have creditor exposure.
- There are substance abuse or financial instability concerns.
- You want maximum flexibility for future circumstances.
Trustee Guide
How to Evaluate HEMS Distribution Requests
If you are serving as trustee of a HEMS trust, you have a fiduciary duty to make reasonable, well-documented decisions.
Here is a practical framework.
Step 1: Identify the Category
Ask:
Is this request for:
- Health?
- Education?
- Maintenance?
- Support?
If it does not reasonably fall within one of these categories, it likely should not be approved unless the trust allows broader discretion.
Step 2: Review the Trust Language Carefully
Not all HEMS clauses are identical.
Some trusts:
- Expand the definition of education.
- Permit home purchases.
- Allow startup capital.
- Include specific exclusions.
Always start with the document.
Step 3: Consider the Beneficiary’s Standard of Living
HEMS is often interpreted in light of the beneficiary’s accustomed lifestyle.
Ask:
- Is this consistent with how they were living before?
- Is this request reasonable relative to the trust size?
- Does it preserve long-term sustainability?
Step 4: Evaluate Financial Impact
A trustee must balance:
- Current needs
- Future needs
- Investment preservation
- Other beneficiaries (if applicable)
Avoid depleting the trust unnecessarily.
Step 5: Request Documentation
For larger requests, obtain:
- Invoices
- Contracts
- Tuition statements
- Medical bills
- Cost estimates
This protects both the trust and you as trustee.
Step 6: Avoid Personal Bias
As trustee, you must:
- Act impartially
- Avoid favoritism
- Avoid emotional decision-making
- Follow fiduciary duties strictly
Document your reasoning for approvals and denials.
Step 7: When in Doubt — Seek Advice
Trustees can and often should:
- Consult trust counsel
- Consult tax advisors
- Seek investment guidance
You are allowed to obtain professional advice in fulfilling your duties.
Examples of HEMS Requests
Likely Approvals
- College tuition
- Surgery not covered by insurance
- Mortgage payments to prevent foreclosure
- Therapy or counseling
- Vocational training
Possibly Approvals (Fact-Specific)
- Down payment on a modest home
- Starting a reasonable business
- Reliable vehicle purchase
Likely Denials
- Luxury vehicles beyond reasonable need
- High-risk speculative investments
- Large cash gifts to third parties
- Excessive lifestyle inflation beyond trust intent
Key Reminder for Trustees
You are not required to approve every request.
Your duty is to:
- Follow the trust terms
- Act in good faith
- Preserve assets responsibly
- Balance present and future needs
A well-administered HEMS trust provides protection without being restrictive.
