An Ohio Legacy Trust is simply an Asset Protection Trust that is authorized by the Ohio Revised Code [1] This type of trust allows an individual to shield or protect certain assets from future creditors. The trust must be correctly set up and drafted but it is an excellent way for individuals to protect their assets.
What is an Ohio Legacy Trust
The Ohio Legacy Trust must be Irrevocable and the trust must also contain spendthrift provisions [2]. Spendthrift provisions are terms and conditions in a trust document that limit the ability of the trustee to make distributions to a beneficiary in order to protect the beneficiary from creditors.
A Qualified Affidavit[3] must also be prepared and filed with the local county in which the creator of the trust is a residence of. This affidavit must be notarized and state the following; 1) The property being transferred into the trust is not from illegal activity; 2) The transferor has full title and ownership in the asset(s) being transferred into the trust; 3) As the result of the transfer of assets, the transferor will not be insolvent; 4) The transferor does not intend to defraud any creditors; 5) There are no pending or threatened court actions against the transferor (unless disclosed in the affidavit); 6) The transferor is not involved in any administrative proceedings (unless disclosed in the affidavit) and 7) The transferor does not contemplate at the time that they will file bankruptcy.
An Ohio Legacy Trust can NOT be used for a person to avoid 1) child support payments; 2) spousal support (alimony); 3) a division of assets to a former spouse.
The Ohio Legacy Trust must also have a ‘qualified trustee' [4]. A qualified trustee can not be the same person who creates the trust (trustor) and if the qualified trustee is a person, then they must be a resident of Ohio. A qualified trustee may also be a 1) Financial Institution; or a 2) Family Trust Company as defined by Ohio Law.
The Individual who creates the Ohio Legacy Trust can also be the beneficiary of the trust but there are certain restrictions on the distribution of the trust assets or income to the beneficiary. The beneficiary is permitted to receive all the income from the trust and up to 5% of the trust principal. An Individual may also transfer a house to an Ohio Legacy Trust and use that house for their personal residence.
A Creditor has 18 months after the qualified disposition (transfer of asset to the trust) to bring a legal action against the Ohio Legacy Trust. In addition the creditor must have been a creditor at the time the qualified disposition was made [5]
An Ohio Legacy Trust is a very good vehicle for certain high wealth individuals to protect their assets from future creditors. However under Ohio Law there are specific requirements that must be satisfied in order to correctly set up this type of trust.
DISCLAIMER
The information contained herein is general in nature, is provided for informational and educational purposes only, and should not be construed as legal or tax advice. The author nor McNamee and Company cannot and does not guarantee that such information is accurate, complete, or timely. Laws of a particular state or laws that may be applicable in a given situation may impact the applicability, accuracy, or completeness of the preceding information. Further, federal and state laws and regulations are complex and subject to change. Changes in such laws often have material impact on estate planning and tax forecasts. As such, no warranties regarding the herein information or any results arising from its use. Furthermore, the author and McNamee and Company disclaim any liability arising out of your use of, or any financial position taken in reliance on, such information. As always consult an attorney regarding your specific legal or tax situation.
[1] O.R.C. 5816
[2] O.R.C. 5816.03 Spendthrift Provisions
[3] O.R.C. 5816.06 Qualified affidavits and related rules
[4] O.R.C. 5816.02 Definitions
[5] O.R.C. 5816.07 (B)
