What does Maintenance and Support Really Mean in a Trust?

September 17, 2013Articles

Trusts frequently provide that income and/or principal can be paid to a beneficiary in the Trustee’s discretion for the beneficiary's health, education, maintenance, and support. This standard, also known as an "ascertainable standard", is commonly included in a trust provision for three main reasons:

  1. It provides guidelines for the Trustee in making distributions;
  2. Depending upon the jurisdiction of the trust, it allows beneficiaries the ability to compel distributions through litigation if the Trustee is unreasonably refusing to make distributions in accordance with the standard; and
  3. It allows a beneficiary to act as the sole Trustee and make distributions to himself or herself as a beneficiary without adverse estate tax consequences. Specifically, the trust property won't be included in the trustee/beneficiary's taxable estate if an ascertainable standard is used.

What encompasses health and education is fairly clear. However, our clients frequently ask us for guidance on what sort of distributions can be made for maintenance and support. As with many areas of the law, there is not a great deal of guidance out there. It is generally agreed that maintenance and support include accustomed living expenses such as mortgage payments, property taxes, insurance payments, utility payments, vacations, and the like. Whether the standard includes items of a more luxurious nature gets into a gray area. The Restatement of Trusts, which is meant to serve as a consensus of the American legal community on trust law (and is not specific to any state), provides a nice summary of the flexibility (or lack thereof) of maintenance and support as part of a distribution standard. Although the Restatement of Trusts provides a general understanding of the law, remember that trust law is different in each state, so you can't rely on it for specific advice in your state. You need to review your state's law to get those answers.