Standards for Heath, Education, Support, & Maintenance

June 7, 2010 by Scott C. Soady

Often trusts provide for the distribution of assets at different intervals. This is a common occurrence where parents want to provide for their children during their minority and then spread out the distributions during adulthood. A typical trust might leave a certain percentage to a beneficiary at age 21, 25, and 30. Other parents may want to provide for distributions at age 25, 30, and the remainder at 35. In the years between the distributions the trustee has the discretion to make distributions for "health, education, support, and maintenance."

The IRS in Section 2041of the Internal Revenue Code sets out ascertainable standards for "health, education, support, and maintenance." The Treasury Regulations provide some assistance in knowing what these terms mean. "Health" for example includes "medical, dental, hospital, and nursing expenses" as well as "health maintenance and comfort." The trustee can probably make distributions that are not strictly medical in nature, maybe food supplements or a item of comfort.

"Education" is more narrowly defined to include college and professional education. Thus if the Trustor wants to expand on that definition to include such things as trade school, art school, travel expenses to and from school, etc., those items should be specifically set out in the trust.

The terms " support" and "maintenance" are synonymous. They include "support in reasonable comfort" and "support in the accustomed manner of living."

Though these ascertainable standards are helpful, the Trustee is still left with making often difficult decisions. Does the beneficiary need a sports car for transportation to work and college or would a used car do? Does the beneficiary have to go to an expensive university to get his education? What kinds of expenses would qualify as for health?

The way you can help your trustee is to create a trust while you are alive that clearly specifies some guidelines as to what distributions would be acceptable for health, education, support, and maintenance. The more specific you are in your trust document as to what your wishes are and what the perameters are for distribution, the easier it will be for the trustee to decide what are the permissible reasons to make a distribution to your beneficiaries.

Roy M. Dopplet & Associates can help you create a trust which will be comprehensive and tailored to include specific definitions of what is an appropriate distribution to a beneficiary. Call us for a complimentary consultation.