Page 41 - December 2018 | Cleveland Metropolitan Bar Journal

Health health insurance, property insurance, basic 308 (Conn. 1947) supports the view that
Distributions for “health” generally include needs, modest vacations, etc. It is less clear other resources should be considered when
emergency medical treatment; physical and whether such payments ought to include determining whether the HEMS standard
psychological treatments; health, dental, and additional luxuries and extraordinary has been satisfied under a trust instrument,
vision care or insurance; home healthcare; vacations. Whether a distribution can be whereas McClintock v. Smith, 29 N.W.2d 248
etc. The propriety of other distributions for made for “maintenance and support” will (Iowa 1947) found that other resources should
“health” can be less clear—for example, spa require a careful look toward the terms not be considered in making discretionary
or golf memberships. Even the propriety of the trust, the settlor’s intent, and the distribution decisions unless there is a clear
of distributions for medical expenses can beneficiaries’ customary standard of living. showing of intent otherwise.
be called into question depending upon In Matter of Estate of McCart, 847 P.2d 184 The potential of liability for action
the facts and circumstances. For example, (Colo. Ct. App. 1992), a court required or inaction puts trustees in a difficult
in Naughton v. First Nat’l Bank of Boston, distributions to a beneficiary for his position. Fortunately, trust agreements,
356 N.E.2d 1224 (1976), a trustee’s refusal maintenance at a level consistent with the common and statutory trust law, and courts
to pay the medical expenses associated beneficiary’s social and economic position generally protect trustees from liability for
with a beneficiary’s last illness that came at the time of the creation of the trust, the reasonable exercise of discretion for
due after the death of the beneficiary was providing for all comforts and necessities distribution decisions under the HEMS
determined to be an abuse of discretion. to which he had grown accustomed. In standard, which itself is relatively broad and
The Court found that payments for support contrast, in Kimball v. Reading, 31 N.H. 352 open to interpretation. Nonetheless, a trustee
and health of the beneficiary extended past (N.H. 1855), a court held that distributions (or a beneficiary) should consider engaging
his death, and the trustee breached his duty of large sums of money for an extravagant legal counsel whenever he, she, or it believes
by refusing to pay for the beneficiary’s final trip were in poor judgment and an abuse of a discretionary distribution decision may be
medical expenses. discretion because some luxuries, even if called into question, because the governing
within the beneficiary’s standard of living, law in any given jurisdiction may give rise to
Education may still be considered outside the scope of unanticipated results.
Distributions for “education” generally a trust.
include tuition for elementary, high school,
college, trade schools, professional schools, Consideration of Other Resources Chad Makuch is an estate planning
etc. In addition, distributions frequently are A sometimes overlooked consideration and tax lawyer at BakerHostetler
made for room and board while enrolled in of distributions under a HEMS standard who focuses on counseling wealthy
college (at least while enrolled full time). is a beneficiary’s other resources. Where families, institutional trustees,
Such distributions for “education” seem a trustee has information regarding other other fiduciaries and tax-exempt
fairly straightforward, but there is a lot assets available to a beneficiary, whether the organizations. He helps families transfer assets
of uncertainty depending, as always, on beneficiary owns those assets or has other and business interests to children, grandchildren
the applicable facts and circumstances. trusts established for his or her benefit, and charities while minimizing or eliminating
In Lanston v. Children’s Hospital, 148F.2d the trustee ought to consider whether transfer taxes; counsels fiduciaries in connection
689 (D.C. Cir. 1945), a trustee refused to such information is relevant to his or her with their responsibilities under complex trusts
pay for a beneficiary’s room and board discretion to distribute trust property. This and applicable laws; and guides public charities
expenses between college semesters as the determination will depend on the terms of the and private foundations through the tax laws
beneficiary was not actively in school at the trust, interests of other beneficiaries (if any), and regulations that govern them. He has been
time. Nonetheless, the Court found that and other relevant facts and circumstances. a CMBA member since 2009. He can be reached
payments for education include support For example, Brennan v. Russell, 52 A.2d at cmakuch@bakerlaw.com or (216) 861-7535.
between college semesters. In Epstein v.
Kuvin, 95 A.2d 753 (N.J. Super Ct. App. Div.
1953), a trust called for the education and Mediator/Arbitrator Ron Kopp
support of a beneficiary. The beneficiary Delivers Closure to Disputes
went on to attend medical school, and the Ron Kopp has spent over 35 years handling high-
Court found that distributions permitted profile litigation. A past president of the Ohio State
for education did not include tuition beyond Bar Association, he is routinely on the list of the Top
a four-year undergraduate institution 100 Ohio Super Lawyers, at times breaking into the
because such postgraduate education was Top 10. Increasingly, parties, attorneys, and judges
outside the scope of the traditional meaning turn to Kopp as a preferred neutral to conduct
of education.
mediations and arbitrations of locked civil disputes.
Maintenance and Support Ron Kopp
Distributions for “maintenance and 1375 East Ninth Street th 330.849.6644
One Cleveland Center, 10 Floor
support” generally include housing expenses Cleveland, OH 44114 rkopp@ralaw.com
(mortgages, property taxes, rent, etc.),
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