A paralegal is assisting an attorney with a complex trust administration. The trust document specifies that the trustee has the authority to distribute income to the beneficiaries 'as the trustee deems appropriate for their health, education, maintenance, and support.' What type of trust is described by this language regarding distributions?
- ASpendthrift Trust
- BCharitable Trust
- CSupport Trust
- DDiscretionary Trust
Show answer & explanationAnswer & explanation
Correct answer: C. Support Trust
A 'Support Trust' is characterized by the trustee's obligation to distribute funds for the beneficiary's 'health, education, maintenance, and support' (often abbreviated as HEMS). While the trustee may have some discretion, it is limited to these specific needs, distinguishing it from a purely discretionary trust where the trustee has absolute power over distributions. The language 'as the trustee deems appropriate' within the HEMS standard is still a support trust.
Why the other options are wrong
- A. A spendthrift trust prevents beneficiaries from assigning or creditors from attaching their interest, which is a protective feature, not a distribution standard.
- B. A charitable trust is established for a charitable purpose and has charitable beneficiaries, not individuals under a HEMS standard.
- D. A discretionary trust gives the trustee absolute discretion over whether and when to make distributions, without a mandatory standard like HEMS.
Support Trust (HEMS Standard)
A type of trust where the trustee is obligated to make distributions to the beneficiary for their 'health, education, maintenance, and support' (HEMS). While the trustee may have some discretion in determining the amount or timing, the distributions are tied to these specific needs, and creditors generally cannot reach these funds if they are necessary for the beneficiary's support.
- Mandatory distributions for HEMS needs
- Trustee has limited discretion within HEMS standard
- Protects beneficiary's basic needs
- Creditors generally cannot reach funds needed for support
Memory trick: HEMS is the 'Support' system for a 'Trust' beneficiary.