The Ohio Legacy Trust Act

On March 27, 2013 the new Ohio Legacy Trust Act took effect in the State of Ohio. This Act provides for a new type of Legacy Trust, which allows an unprecedented level of asset protection within the State of Ohio. Unlike a normal revocable trust, an Ohio Legacy Trust is in most cases shielded from creditors. Ohio has joined a minority of states in allowing these types of asset protection trusts. An Ohio Legacy Trust is available to not only Ohio residents, but also the residents of any state as long as the trust is created and administered in accordance with all of the provisions of the Ohio Legacy Trust Act.

The Ohio Legacy Trust is an irrevocable trust, meaning once the trust has been formed the Grantor no longer has the power to terminate the trust. The Grantor can still maintain many other powers and rights with regards to the trust. The grantor can retain all of the following powers:

  • withdraw up to five percent (5%) of the trust assets annually in addition to any distributions that are authorized by the trust agreement and distributed by the Trustee;
  • the Grantor can be the sole beneficiary of the Trust or a joint beneficiary;
  • provide guidance and direction concerning Trust investments;
  • continue to live in a residence held by the Trust;
  • veto distributions from the Trust;
  • remove and replace the Trustee;
  • the Grantor can create provisions that the trust is responsible and is authorized to pay for any income tax on any income earned by the Trust assets;
  • and the Grantor can direct other distributions of trust assets to person’s other than the Grantor, Grantor’s creditors, or Grantor’s Estate.

These powers allow a Grantor a large amount of control over the Ohio Legacy Trust, but also allow a level or asset protection not found in a standard revocable trust.

The Ohio Legacy Trust also has limitations in regards to the Trustee. Firstly, the Grantor cannot be the Trustee of the Legacy Trust. Secondly, the Trustee must be an Ohio Trustee. Therefore the Trustee can be either an Ohio corporate Trustee, or any individual who resides within Ohio, including the Spouse of the Grantor or any other family member. These restrictions are necessary to properly protect the trust assets, but the Ohio Legacy Trust Act still allows a great deal of flexibility in naming a Trustee.

It is important to plan ahead in creating an Ohio Legacy Trust. This Trust is subject to a Fraudulent Transfer Statute in Ohio and cannot be used for the sole purpose of defrauding or avoiding known creditors. In forming the trust, the Grantor must sign an affidavit, under oath, stating that:

  1. the assets being transferred to the trust are not from an unlawful activity;
  2. the Grantor has the right to transfer the assets;
  3. the transfer won’t make the Grantor insolvent;
  4. the Grantor doesn’t intend to defraud his or her creditors;
  5. there are no court or administrative actions pending that are not identified in the affidavit;
  6. and the Grantor does not intend to file for bankruptcy.

This trust is designed for those individuals who are planning for the protection of their assets. If created before an asset issue arises, the Trust will be shielded from almost all creditors. There are a few exceptions. Firstly, creditors at the time of creation have a period of time to object and maintain their ability to seize assets. Creditors that arise after creation of the trust will not have this ability. Secondly, child support payments can be collected from the trust. Thirdly, a former spouse will have rights against the trust if the trust was created during the marriage. Any Legacy Trust created before the marriage will not be subject to claims of a spouse or former spouse.

The Ohio Legacy Trust creates a unique opportunity for a person to protect their assets while benefitting from them. The key is planning ahead. The Ohio Legacy Trust is an effective shield for most claims that arise after the creation of the Trust. The best time to act is now.

For anyone interested in exploring the benefits or options surrounding this new type of trust, please feel free to use the contact form or call to set up a free initial consultation.