Every practiced estate planner knows that designating distributions from trusts for the “health, education, maintenance and support” (referred to herein at times as HEMS or the Standard) of the beneficiary are “magic” tax words in that they establish a special power of appointment rather than a general power. IRC §2041. But whereas the tax results of such standards are well known, how is that familiar tax standard interpreted in New York for purposes of distributions? How can estate planners avoid construction proceedings in order to determine the intent of a grantor when HEMS is the standard for distribution? This article will discuss relevant case law where available and suggest some approaches in drafting the standard.
No truer statement has been made than “no will has a brother and that each testamentary instrument must be judged on its own text against the background existent when the will was signed.” In re Egan’s Estate, 39 N.Y.S. 2d 96, 98 (Sur. N.Y. Cty. 1942). Trusts and estate questions must track the intent of a testator or a grantor and this is the paramount objective of the courts. In re Levinson’s Will, 5 Misc. 2d 979 (Sur. Kings Cty. 1957). Intent, in turn, can be discerned in a number of ways and is easily skewed one way or another by a single word or circumstance. Reliance, therefore, on any particular case is unlikely to be definitive in interpretive questions of this kind but the decisions can certainly direct the planner in the right direction. It is further the case that the circumstances in which issues have arisen in the interpretation of the Standard must be considered in evaluating the results of various cases.
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