In March 2013, the Ohio Legacy Trust Act went into effect. What’s noteworthy about this type of trust is the degree of protection it can shield trust assets from future creditors. In situations where people have a typical revocable living trust, potential creditors can still reach the assets in the trust. With an Ohio Legacy Trust, the assets are much more shielded.
Another important point regarding the Ohio Legacy Trust is that although it is irrevocable, you (the grantor) can still retain some powers over the trust and the assets held in it. For instance, you can continue living in a home that’s been placed in the trust, replace appointed trustees, and withdraw a small percentage of the trust assets each year.
Should you consider setting up this kind of trust?
Concerns about creditors. If you are in a profession where you are concerned about lawsuits (i.e. a doctor or a business owner), an Ohio Legacy Trust can protect assets it holds from potential plaintiffs who might sue you. You may also want to establish such a trust prior to getting married, because what you place in it may then be protected in the event of a divorce. One important point to make is that while the trust shields assets from various potential creditors in the future, it does not necessarily give you protection from existing creditors. There’s a window of opportunity after a trust is formed when creditors can fight to keep obtaining assets from it.
The amount of assets. The trust will be more attractive to people who have more assets to protect; for people who don’t, it might be less suitable.
Trust irrevocability. An Ohio Legacy Trust is irrevocable. Thus, you would be laying a portion of your assets outside of your complete control. You have to carefully consider whether you are in a financial position to only have limited control over your assets placed in the trust. If you do opt to create an Ohio Legacy Trust, you should consult with a financial planner to ensure that you will be placing the right amount of assets into it.
The right motives. You will not be able to form this kind of trust under certain circumstances, for instance to avoid child support payments or during bankruptcy.
Bill Hesch is a CPA, PFS (Personal Financial Specialist), and an attorney licensed in Ohio and Kentucky who helps clients with their financial planning. He also practices elder law planning, estate planning, and Medicaid planning in the Greater Cincinnati and Northern Kentucky areas. His practice area includes Hamilton County, Butler County, Warren County, and Clermont County in Ohio, and Campbell County, Kenton County, and Boone County in Kentucky. Bill will be able to determine if an Ohio Legacy Trust is right for you, and will provide advice as to what and how many assets should be placed into the trust.