Q&A on Ohio's Legacy Trust Act

Q&A on Ohio's Legacy Trust Act 2/3/13

OHIO PASSES LAW TO ALLOW YOU TO SET UP A TRUST TO PROTECT YOUR ASSETS FROM CREDITORS.

1. Question- WHAT IS THE OHIO LEGACY TRUST ACT?

Answer- Effective March 27, 2013, a new Ohio law called the OHIO LEGACY TRUST ACT allows you to set up a trust – the Ohio Legacy Trust – which allows you and your family to have access to the assets held by the trust, while still protecting the assets from most creditor claims. This is similar to offshore trusts that have been used for decades.

2. Question- HOW CAN YOU SET UP AN OHIO LEGACY TRUST?

Answer - An Ohio legacy trust must satisfy the following rules:

* The trust must be written, irrevocable and governed by Ohio law.

* The trust must have the appropriate language to indicate that creditors cannot go after the trust assets.

* The trust must have least one trustee who is a resident of Ohio or a bank or trust company operating in Ohio. The person setting up the trust cannot be the trustee.

3. Question - WHAT CREDITORS CAN IGNORE AN OHIO LEGACY TRUST?

Answer – The following creditors can still seize assets held by an Ohio Legacy Trust.

* A transfer with the specific intent to defraud a specific creditor.

* The payment of child or spousal support, or alimony or a property settlement to a spouse or former spouse, if the spouse or former spouse was married to you prior to you setting up the trust. Therefore there could be no claims by a new spouse as to assets transferred to the Ohio Legacy Trust funded prior to the marriage.

Other creditors will be subject to limited abilities to pierce the Ohio Legacy Trust as described below.

4. Question - WHAT RIGHTS CAN YOU RETAIN AND STILL HAVE ASSET PROTECTION?

Answer – You can keep one or more of the following rights:

* You can keep the power to veto distributions from the Ohio Legacy Trust to any beneficiary of the trust. This is probably the most important right since the money in the trust is not in your control but is held by the trustee.

* The trustee can distribute trust assets from the Ohio Legacy Trust to the person setting up the trust. The trustee can be given complete discretion to make the distribution or can be subject to certain standards. The Ohio Legacy Trust can also have a provision terminating that right of the person setting up the trust to receive assets upon the happening of certain events.

* Even though the trust is irrevocable you can change who inherits the assets and when.

*You can have the automatic right to invade up to 5% of the trust principal every year. This would be subject to creditors' claims.

* You can keep the right to remove any trustee and appoint a new trustee.

* The trustee can be given the authority to pay death taxes, estate administration expenses or your debts existing prior to your death.

5. Question - WHO CAN BE A TRUSTEE OF A LEGACY TRUST?

Answer -

* A resident of Ohio or a trust company or a bank authorized by Ohio law to be a trustee or regulated by the Ohio superintendent of banks or by the FDIC or other federal agencies.

*The trustee maintains custody in Ohio of some or all trust property, maintains records either exclusively or nonexclusively, prepares or arranges for the preparation of income tax returns or otherwise materially participates in administration of the trust.

YOU CANNOT BE YOUR OWN TRUSTEE.

6. Question- WHO CAN BE AN ADVISOR TO A LEGACY TRUST?

Answer - An advisor is any person even the person who set up the trust. The advisor can be given the authority to remove or appoint one or more trustees or to direct, consent or disapprove of investments or distributions.

7. Question – WHERE DO I FIND MORE ABOUT THE OHIO LEGACY TRUST?

Answer -The law is new and difficult to understand. This is a summary of some of the requirements of the trust. For a more detailed discussion of the Ohio Legacy trust go to www.budsolo.com and search for "Ohio Legacy Trust."

Copyright Solomon, Steiner Peck, Ltd., 2013

This newsletter is intended to provide general and practical information to assist the public in understanding legal issues. Legal advice should only be given when the lawyer and client have an opportunity to explore fully the factual circumstances related to the client's situation and the legal options, as explained by the lawyer to the client.