What does the trust’s “health, education, maintenance, and support” language actually allow, and how does a corporate trustee decide what requests are reasonable? – North Carolina

Short Answer

In North Carolina, “health, education, maintenance, and support” (often called “HEMS”) is commonly used as a practical boundary on what a trustee may pay for a beneficiary. It generally allows distributions that cover medical needs, schooling and training, and a beneficiary’s reasonable living expenses consistent with the trust’s purpose and the beneficiary’s circumstances. A corporate trustee typically decides what is “reasonable” by reading the trust first, then applying fiduciary duties (good faith, prudence, and fair treatment of beneficiaries) and documenting why a request fits (or does not fit) within HEMS and the trust’s long-term plan.

Understanding the Problem

In North Carolina estate planning, the key question is: when a trust says the trustee may distribute for “health, education, maintenance, and support,” what kinds of expenses fall inside that language, and how does a corporate trustee decide whether a particular distribution request is appropriate. The decision point usually arises after a parent’s death when family members begin requesting payments from a trust administered by a corporate trustee, and the trustee asks for information or declines a request as outside the trust’s standard.

Apply the Law

In North Carolina, a trustee must administer a trust in line with the trust’s terms and purposes and must act as a fiduciary. Even when the trust uses broad distribution language like HEMS, the trustee still has to exercise judgment in good faith and in a way that fits the trust’s instructions, the beneficiary’s needs, and the trust’s ability to support the beneficiary over time. When a corporate trustee evaluates “reasonableness,” it typically focuses on (1) whether the request matches one of the HEMS categories, (2) whether the amount and timing make sense given the trust’s size and expected duration, and (3) whether approving the request would be consistent with the trustee’s duties to all beneficiaries (for example, current and remainder beneficiaries).

Key Requirements

The request must fit within HEMS: The expense should be tied to health care, education, or reasonable living expenses (maintenance/support) rather than a purely optional want that does not relate to the beneficiary’s well-being or standard of living.
The trustee must follow the trust’s specific instructions: Many trusts add limits (for example, “as needed,” “in the trustee’s discretion,” “consider other resources,” or “do not reduce principal”), and those modifiers often matter as much as the HEMS words themselves.
The trustee must act prudently and fairly: A corporate trustee generally needs enough information to make a defensible decision, treat beneficiaries consistently, and preserve the trust for its intended duration.

What the Statutes Say

N.C. Gen. Stat. § 32-73 (Court power to permit deviation) – confirms a court can authorize deviation from an instrument’s terms in appropriate cases, which matters when families consider court involvement to adjust administration.
N.C. Gen. Stat. § 32-71 (Prudent person rule for fiduciaries) – describes a prudence-based standard of care for fiduciaries (with a higher expectation when special skills are represented), a concept corporate trustees often mirror in their internal review and documentation.

Analysis

Apply the Rule to the Facts: Here, the trust is administered by a corporate trustee and contains broad HEMS language, so distribution decisions will usually turn on whether each request can be documented as a health, education, maintenance, or support need and whether the amount is sensible in light of the trust’s long-term plan. If the family is also evaluating real property use (such as a relative living on trust property), the trustee will typically treat that as a “maintenance/support” question only if the trust authorizes housing support and the arrangement protects the trust (clear terms, expenses, insurance, and a plan for repairs and exit). If the family is considering court modification or trustee replacement, the trustee’s written decision-making record on HEMS requests often becomes important because it shows whether the trustee acted consistently and in good faith.

How corporate trustees commonly interpret each HEMS category

Health: Medical, dental, vision, mental health care, therapy, prescriptions, medical equipment, health insurance premiums, and sometimes health-related transportation or home modifications when tied to a documented medical need.
Education: Tuition, fees, books, supplies, tutoring, required technology, and reasonable living costs tied to attendance (for example, room and board while in school), and sometimes job training or credentialing programs.
Maintenance and support: Day-to-day living expenses that keep the beneficiary in a reasonable standard of living (housing costs, utilities, food, basic transportation, and similar necessities). This category is often where disputes arise, because it can overlap with lifestyle choices and because trusts sometimes include additional limits (like “in the trustee’s discretion” or “as needed”).

How a corporate trustee decides what is “reasonable”

Start with the trust document’s modifiers: Corporate trustees typically look for phrases like “as the trustee deems advisable,” “as needed,” “for the beneficiary’s benefit,” “consider other resources,” “do not equalize,” or “do not invade principal,” because those words change the analysis.
Confirm the purpose and time horizon: A trust meant to last for decades is usually administered differently than a trust meant to be spent down quickly. “Reasonable” often means sustainable.
Ask for documentation: A corporate trustee commonly requests invoices, budgets, proof of enrollment, medical letters, lease terms, or repair estimates. This is not just bureaucracy; it is how the trustee shows it acted prudently and consistently.
Consider fairness among beneficiaries: If there are multiple current beneficiaries or remainder beneficiaries, the trustee often evaluates whether a request would unfairly favor one person or prematurely deplete the trust.
Use a consistent internal process: Many corporate trustees use written guidelines, committee review for large requests, and file notes explaining why a request fits (or does not fit) within HEMS.

Process & Timing

Who requests: A beneficiary (or a legal representative). Where: With the corporate trustee administering the North Carolina trust. What: A written distribution request with supporting documents (invoice, estimate, budget, school/medical proof). When: As needed; timing often depends on the trustee’s review cycle and whether the request is routine or large/unusual.
Trustee review: The trustee compares the request to HEMS and any extra limits in the trust, checks available liquidity, and may ask follow-up questions or propose paying vendors directly rather than reimbursing.
Decision and documentation: The trustee approves, partially approves, or denies the request and documents the reason. If the family disputes the decision, the next step is usually a written appeal within the trustee’s process and then, if necessary, a court filing for instructions or other relief in the appropriate North Carolina court.

Exceptions & Pitfalls

“HEMS” is not a blank check: Requests that look like gifts to others, luxury purchases with no tie to health/education/support, or open-ended cash transfers often trigger extra scrutiny or denial unless the trust clearly authorizes them.
Real property use can create conflict if it is informal: Letting a relative live on trust property without a written occupancy agreement can lead to disputes about rent, repairs, taxes, insurance, and when the arrangement ends. Corporate trustees typically require clear terms to protect the trust and to show fair administration.
Missing paperwork delays decisions: Corporate trustees often cannot approve large or unusual requests without invoices, estimates, or proof of need. A vague request (“help with living expenses”) is harder to approve than a budget with specific line items.
Other assets and titling issues can affect cash flow: If the family is also sorting out non-trust assets (like joint bank accounts and survivorship questions) or probate administration, the trustee may wait for clarity on what the trust actually owns and what expenses belong to the estate versus the trust.

Conclusion

In North Carolina, HEMS language usually authorizes distributions for medical needs, education costs, and reasonable living expenses that support the beneficiary in a way that matches the trust’s purpose and limits. A corporate trustee decides what is reasonable by applying the trust’s wording, evaluating sustainability and fairness, and requiring documentation that ties the request to health, education, maintenance, or support. The most practical next step is to submit a written request with invoices or a clear budget to the trustee as early as possible before any payment deadline.

Talk to a Estate Planning Attorney

If a family is dealing with HEMS distribution questions, a corporate trustee denial, or planning an agreement for someone to live on trust property while protecting everyone’s interests, our firm has experienced attorneys who can help explain options and timelines. Call us today at [919-341-7055].

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.