The Ohio Legacy Trust is an estate planning instrument (also known as a Domestic Asset Protection Trust), created by Ohio law effective March 2013, that allows a person to protect assets from future creditors.
What is an Ohio Legacy Trust?
An Ohio Legacy Trust (OLT) is a tool used to protect assets from future creditors. Anyone (adult, business, corporation, out of state resident or out of state business) can create an OLT, by funding the trust with his or her own assets. An OLT does not replace your will, power of attorneys, living wills, or revocable trusts. Further, you must ensure that you coordinate your OLT with your other estate planning tools.
How Do You Create an Ohio Legacy Trust?
An Ohio Legacy Trust must: 1) be in writing; 2) appoint an Ohio trustee (Independent trustees may include, for example, corporate bank trustees, institutional trustees, professional trustees, accountants, attorneys or financial planners); 3) be irrevocable; 4) have a “spendthrift” clause (making the trustee responsible for distributions); and 5) be subject to Ohio law. You will also sign an affidavit which states that you are and will still be able to pay your debts after creation of the OLT
How Does an Ohio Legacy Trust Work?
Most things can be put into your OLT; the only exclusions are IRAs and retirement accounts. However, because you give up control of your assets to an independent trustee, you should only put a small percentage of your assets into the OLT.
Normally an OLT includes distribution provisions for your heirs and beneficiaries. Typically, OLT beneficiaries will include you, your spouse and your children, but you can also name a charity, grandparent, parent or friends as beneficiaries.
After 18 month (time-frame required by law) has passed and you correctly created and funded your OLT, you can request distributions in writing from your trustee. It is important to note that your trustee can refuse to distribute your assets, but this requirement is essential to protect you from creditors.
What are the Advantages of an Ohio Legacy Trust?
If created correctly, once the 18 month window passes (the time-frame required by law), future unknown creditors cannot access funds in the OLT. Ohio law does provide exceptions to this rule for child and spousal support. To see whether an Ohio Legacy Trust is an appropriate creditor protection vehicle for you, contact a Cleveland estate planning attorney.