Recently, Ohio passed a new estate planning law that has significant implications for families living in the state. In the Ohio Asset Management Modernization Act of 2012 (“AMMA”), the Ohio Legacy Trust Act was created.
Why is this important?
Prior to the enactment of the Ohio Legacy Trust Act, an Ohio resident could create a trust on behalf of another person, with the assets in that trust protected from future creditor claims. However, an Ohio resident could not create a trust protecting his or her own assets from future creditor claims.
According to the National Law Review, “With an increasingly litigious society, this left individuals with few options for protecting their assets from potential future litigation other than taking assets to jurisdictions outside of Ohio with stronger asset protection laws.”
Ohio’s lack of wealth protection laws made it a less attractive state to live in. That changed, however, with the Ohio Legacy Trust Act. Since late March of this year, Ohio residents are now permitted to transfer some of their assets to trusts of which they are beneficiaries, where their assets will still be protected from creditors. As a bonus, in doing so, these individuals will be able to avoid the fees that come with out-of-state trusts.
Having assets in an asset protection trust will protect them from most creditors. Still, there are limitations to the asset protection: those who are seeking to recover child support, spousal support, alimony, or marital division of property will be permitted to make their claims. In addition, creditors who can prove that assets were transferred to the trust in an attempt to defraud the creditor may be able to make a recovery from the trust assets.
It’s important to note that the settlor of the trust is required to appoint another person as the trustee of the trust. The legacy trust is often an appropriate option for physicians, attorneys, and business owners, in particular.
If you have questions about the Ohio Legacy Trust Act, or would like to know whether an irrevocable trust might be right for you, please contact our office.