If you’re creating an estate plan to protect young or financially inexperienced heirs such as your child or grandchild, be sure to include a HEMS provision. The HEMS provision is a guideline for the trustee of your trust to explain how you want your assets to be spent to provide for your heirs – and protect your inexperienced heirs from financial mistakes. HEMS is an acronym that stands for Health, Education, Maintenance and Support, and indicates how money should be used for expenses in those categories.
Here are some examples of HEMS distributions that would be designated in an estate plan:
Health:
• Medical treatment
• Health insurance
• Doctor’s appointments, eye exams, dentist appointments
• Prescription drugs
• Elective procedures
• Gym memberships
Education:
• Tuition
• School housing, dining, books
• Career training
• Semesters abroad
• Computers and software
Maintenance and Support:
• Mortgage or rent
• Taxes
• Insurance
• Vacations and travel
• Gifts and charities
• Entertainment and hobbies
The grantor of the trust has a lot of discretion in determining how the HEMS provision is written in the estate plan. A HEMS provision gives a trustee guidance on how assets should be distributed, but the trustee ultimately has the discretionary authority to decide whether an expense qualifies.
HEMS restrictions are recognized by the IRS and are protected from certain taxes and creditors.
HEMS are just one way to protect and preserve your assets for your loved ones. For help creating a trust, or other estate planning documents like wills, living wills, and POAs, contact the estate planning lawyers at Estate and Probate Legal Group. Whether you have documents that need review or updating, or it’s your first time doing estate planning for your family, our team can help. Call 630-864-5835 today to schedule a free consultation or to book an appointment at our Oak Brook office.
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