The Legacy Trust: Ohio’s Version of the Domestic Asset Protection Trust

Estate planning is critical to personal and financial security, as well as to preserving a legacy. For Ohio residents seeking high-level asset protection and a way to safeguard their assets for themselves and future generations, the Ohio Legacy Trust Act offers a solid solution. In this blog post, we will cover the key pieces of the Ohio Legacy Trust Act and explore how a Domestic Asset Protection Trusts (DAPT) can help individuals secure their financial legacy.

The Ohio Legacy Trust Act, enacted in 2013, provides individuals with a powerful tool to protect their assets from potential creditors. This statute allows individuals to create a DAPT, known under the law as a “Legacy Trust.” These trusts are irrevocable, meaning that once assets are transferred into the trust, the Trustmaker effectively cedes control over them. But the Trustmaker gets to create the terms of the trust, including who will serve as current and successor trustee, the investment authority, and the current and future beneficiaries as well.

What are the key Features of a Legacy Trust?

  • Irrevocability: As mentioned, the Ohio Legacy Trust is an irrevocable trust, which means that the assets placed within it cannot be reclaimed by the Trustmaker. This ensures that the trust’s assets are safeguarded from potential creditors.
  • Self-Settled: The Trustmaker of the trust can also be one of its beneficiaries, allowing them to benefit from the trust’s assets while still protecting the assets from potential creditors.
  • Statute of Limitations: Under Ohio law, creditors have a narrow window within which they can challenge assets transferred to a Legacy Trust. This time limit can provide additional (and faster) security to the trust’s assets than exist under other parts of Ohio law and the laws of other states.
  • Creditor Protection: Assets held in an Ohio Legacy Trust are generally safe from most creditors, except in cases of fraud or fraudulent transfer and other “exception creditors” (e.g. child support, alimony).
  • Flexibility: If structured correctly, a Legacy Trust can permit the Trustmaker to change Trustees and the beneficiaries, even though the trust is irrevocable.
  • Tax Benefits: Legacy Trusts can also be structured to ensure asset growth inside the trust passes estate tax free, or it can be structured to ensure that the assets get a step-up in cost basis when the Trustmaker passes away.

Is it that easy to protect your assets?

Well… no.

Beyond the complexities of creating an advanced and technical trust in general, there are additional statutory requirements that make a trust a Legacy Trust. It’s a tool that needs guidance from an attorney that understands them. Further, every transfer of an asset requires a solvency analysis done contemporaneously with the transfer, to demonstrate that the Trustmaker remains solvent (able to pay debts) even after the transfer. Lastly, a Legacy Trust will not protect someone from known or expected creditors, which means the time to plan is before an event creating liability happens.

So, are your assets protected? Do you want them to be?

If you’d like to discuss creating an Ohio Legacy Trust with an OSBA Certified Specialist in Estate Planning, Trust and Probate Law, we’ll be happy to set up a time for you to chat with us. Just send us a note or give us a call. Let’s Talk!

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