Learn About the Benefits of an Ohio Legacy Trust From Our Northeast Ohio Estate Planning Lawyer
An Ohio legacy trust is designed to protect an individual's future assets. It is authorized by the Ohio Revised Code. This type of trust allows an individual to shield or protect certain assets from future creditors. Our Northeast Ohio estate planning lawyer can help ensure that the legacy trust is correctly set up and drafted so you can have peace of mind knowing you have protected your assets.
What Is an Ohio Legacy Trust?
In Ohio, a legacy trust must be irrevocable and contain spendthrift provisions. Spendthrift provisions are terms and conditions in a trust document that limit the ability of the trustee to make distributions to a beneficiary to protect the beneficiary from creditors.
A qualified affidavit must also be prepared and filed with the local county where the trust's creator is a resident. This affidavit must be notarized and state the following:
- The property being transferred into the trust is not from illegal activity
- The transferor has full title and ownership in the asset(s) being transferred into the trust
- As a result of the transfer of assets, the transferor will not be insolvent
- The transferor does not intend to defraud any creditors
- There are no pending or threatened court actions against the transferor (unless disclosed in the affidavit
- The transferor is not involved in any administrative proceedings (unless disclosed in the affidavit)
- The transferor does not contemplate at the time that they will file for bankruptcy
An Ohio legacy trust can NOT be used as a way to avoid the following:
- Child support payments
- Spousal support (alimony)
- Division of assets to a former spouse
The legacy trust must also have a qualified trustee. 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:
- Financial institution
- Family Trust Company as defined by Ohio law
The individual who creates the 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 legacy trust. In addition, the creditor must have been a creditor when the qualified disposition was made.
An Ohio legacy trust is an ideal instrument 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 set up this type of trust correctly.
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 a 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.