I am trustee for an irrevocable trust what do the words health, education and maintenance mean?

Question

I am wondering if I can pay my bills from the trust using the above mentioned language.  My CPA feels that I cannot, I disagree with him.

Paul Nidich · Answer

It's not that simple.

John Brennan · Answer

I would have to review all of the language of the trust before I could form an opinion. You're welcome to call myself or another attorney and engage them to give you an opinion you can rely upon.

Edwin Fee · Answer

Health, education, and maintenance are fairly broad categories. If you are a discretionary beneficiary of the trust, then some or all of your bills may fit within these categories.

James Oberholtzer · Answer

As the trustee, you can use the income and principal of the trust for the beneficiaries.  Are you also a beneficiary?  If not, you cannot use the trust resources for yourself.  If you are a beneficiary, you can use the resources under the conditions set forth in the trust.  You have to read the entire trust since some provisions have cross provisions effects.  So, you cannot just take one phrase out of context and use it as your guide.  That said, "health, education and welfare" is a phrase taken from tax law as well as trust law.

Neil Lehto · Answer

Unless you are a beneficiary of the trust, you may be entitled to pay any of your bills from the trust. Ordinarily, the phrase "health, education and maintenance" would apply not to the trustee but to the beneficiary.  The trustee is not ordinarily entitled to pay his own bills from the trust. You disagree at your peril with the advice of your CPA without consulting with legal counsel and, if necessary, getting a court ruling.

S. Micah Salb · Answer

This is a very good question.  Deciding what funds in trust can be used for is not always easy, and the trustee's role as a fiduciary means that he or she must be very, very careful in making these decisions.  "Health, education and maintenance" is a term of art that appears in the Internal Revenue Code.   Spending money for "HEMS" (as it is usually described) is frequently permissible without causing the trust to be deemed to be the property of the beneficiary.  The answer to your question depends on many factors, including the amount of money held in trust, the standard of living that you are seeking to maintain, the standard of living that you had at the time of the creation of the trust, who the successor beneficiaries of the trust are, and of course the language in the trust agreement.  Fundamentally, an authorization to use funds for your health, education, and maintenance means that the funds  may be used to pay your bills

Brian Haggerty · Answer

This question cannot be answered except by reference to the whole trust document. If the "ascertainable standard" of health, education, maintenance (usually "and support") is being used, then there is some tax aspect to this trust. Do not make mistakes in your position as trustee of an irrevocable trust; get counsel from a lawyer concerning your duties, or you may incur liabilities to other beneficiaries of the trust, or incur tax liabilities.

James Frederick · Answer

An attorney should review the trust agreement to determine the effect of ALL of its provisions. I could see this going either way. I assume from your questions that YOU are the successor trustee?

Shadi Ala'i AlaiShaffer · Answer

it means you can pay for basic needs of life: food, rent or housing, medical etc... basic needs for living....

William Nebeker · Answer

In order for the proceeds of the trust to pay bills you may have the general conditions must be met: 1) you must be a beneficiary of the trust, 2) your bills must be within the plain meaning of either health, education and/or maintenance. In order to get a better understanding of those specific words in regard to Trust administration, you should consult an attorney.

Jon Zahaby · Answer

This Paragraph is taken directly from the Treasury Regulations regarding IRS Section 2041 ascertainable standards.  "As used in this subparagraph, the words support? and maintenance are synonymous and *their meaning is not limited to the bare necessities of life *. A power to use property for the comfort, welfare, or happiness of the holder of the power is not limited by the requisite standard. Examples of powers which are limited by the requisite standard are powers exercisable for the holder's support, support in reasonable comfort, maintenance in health and reasonable comfort, support in his accustomed manner of living, Treasury Regulations, Subchapter B, Sec. 20.2041-1.  This is pretty much self explanatory.  Without actually seeing your trust I cannot tell for sure, however, if your Trust is drafted correctly you have the right to pay your bills if paying those bills is necessary to sustain your reasonable comfort and maintain your support.  Therefore, I cannot agree with your CPA with the information I have been given.

Neal Michael Rimer · Answer

As the Trustee, you are not entitled to the benefits that a beneficiary would be entitled to receive.   As the Trustee, you are acting in a fiduciary capacity.  You owe a duty of loyalty and care to the beneficiaries.  You must deal with the assets as a prudent investor would invest.  You must render an accounting to the beneficiaries at least annually and file tax returns for the Trust.  It is your obligation to retain knowledgeable advisors to assist you and to advise you on Trust Accounting and Trust Taxes so as to minimize the income taxation in the Trust and preserve as much as possible for the benefit of the beneficiaries.   When you deal with the beneficiary and what their requests for funds is based on, you need to obtain a financial statement from the beneficiary and possibly tax returns and payroll stubs to evaluate whether they qualify for a distribution based upon health, education and maintenance.  You will need a written request from the beneficiary along with a detail of the purpose for the distribution and the amount.   As Trustee, you are most likely able to pay yourself a fee for services rendered.  You will need to keep a detailed record of your time and expenses so that you can be reimbursed.  Your hourly rate of pay will depend on what you do for the Trust and your level of skill and knowledge in a particular area.    As a Trustee, you are most likely entitled to be represented by an attorney, at the expense of the Trust, so that you can do your job correctly and without incurring liability for your actions and at a tax deductible expense of the Trust.

Dara J. Goldsmith · Answer

Usually those words are associated with the types of expenses being paid by the Trustee for a beneficiary, not the trustee's expenses.  The trustee's expenses (usually limited to actions associated with the trust's administration) are usually addressed in the trust as well, or if not, possibly by state law.  You should seek legal counsel.  It may be a good idea to speak with the attorney who drafted the trust, if not another qualified estate planning attorney will be able to advise you.

Phillip Day · Answer

The terms Health, Education and maintenance used in a trust are typically referred to as a HEMS standard or an ascertainable standard commonly used by the IRS under code section 2041 to allow a trustee some guidance when when discretion is not allowed.  For example, it is common for a trust to withhold distribution to children under a certain age until they attain an age of maturity such as 25 so that the monies are not immaturely squandered. However, a HEMS standard is usually incorporated allowing the trustee to distribute money for educational purposes if the child needs it or medical purposes.  So let's say an 17 year old wants to get a car to drive to school because it is cheaper than the bus and it would help out his family.  The trustee could distribute money in advance of age 25 for a reasonable car, but not necessarily an expensive sports car.  So in your question, you want to know if you can pay your bills from the trust.  That begs the question, are you the beneficiary that the trust is set up for?  If not, but you are the trustee, then you cannot rely on that provision to make the reimbursement.  If you are the beneficiary of the trust that is set up and you are also the trustee, you probably are allowed depending on what the trust says. Your CPA seems to feel that it would be a violation of the trust terms and he might be right.   I would recommend that you take your trust to an experienced trust lawyer who can specifically answer your question by reading the trust and understanding who all the players are.

Dwight Tompkins · Answer

Health, education and maintenance are the necessities for the beneficiary or beneficiaries named in the trust.  They mean exactly what the common meaning of those words mean.  Health = doctors, medicines, treatments, hospital, etc., Maintenance means food, shelter, clothing, i.e., the maintenance of the beneficiary or beneficiaries. If you are not the beneficiary of the trust, and I presume that you are not because of the trust being irrevocable, then you may not pay your bills from the trust.  Assuming your CPA has read the trust, and I have not, and he or she has reached that conclusion, then you should be very careful not to use the trust assets for your own benefit. You would be wise to seek the counsel of a qualified trust attorney.

Ben Liu · Answer

You should have an attorney review the whole trust for context.  Doesn't the trust provide for trustee fees?

Darin Christensen · Answer

It depends on what the bills are for.  Bills for education and medical care would fit within health and education.  Bills for utilities and reasonable living expenses would fit within maintenance.  Bills for lavish vacations, business expenses, gambling, etc., probably would not fit within any of the categories.

Norman Green · Answer

You need to ask your lawyer, not your accountant.  I cannot answer your question meaningfully without seeing much more of your trust instrument.  It certainly does not authorize you to pay all your bills from the trust.  The trust likely requires that you determine that the funds are needed and perhaps that other sources are exhausted.

Victor Waid · Answer

Exactly what they say. For a further definition, you may want to look at the probate code; also check Google by putting in a question, and look at the various references for further explanation.

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I am trustee for an irrevocable trust what do the words health, education and maintenance mean?

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