Monday, June 16, 2014
Kevin R. McKinnis recently published an article entitled, The Good, the Bad, and a New Kind of Prenup: An Analysis of the Ohio Legacy Trust Act and What Asset Protection Trusts Will Mean for Ohio, 61 Clev. St. L. Rev. 1105-1141 (2013). Provided below is the introduction:
If there were a way in Ohio to protect your assets from future creditors, judgments, or divorce, would you not want to know about it? Ohio House Bill 479 contains a provision, the Ohio Legacy Trust Act, which will afford individuals the opportunity to protect their assets without going outside the country or state. This article explores various aspects of the Ohio Legacy Trust Act and what it will mean to Ohio.
It is human nature to want to protect what one has worked hard to earn or accomplish. It is this very nature that entices individuals to search for creative methods by which to protect one’s assets, whether from high tax rates or creditors. As laws continually change, individuals strive to protect their assets in the most effective and secure manner possible. As a result, the protection of one’s assets has evolved from the use of offshore Asset Protection Trusts (APTs) to the use of domestic APTs (DAPT).
The Ohio Legacy Trust Act is an attempt to modernize Ohio’s wealth management laws to make Ohio competitive with other states in the wealth management and trust market. Ohio’s proposed trust legislation was modeled after the “successful plans used in other states,” such as Alaska, Delaware, and Nevada.
This Note explores the impact that the Ohio Legacy Trust Act could have on Ohio. Section II explores the evolution of the APT. Section III explains the requirements to establish an Ohio Legacy Trust and compares the requirements to those of other states. Additionally, this Section will explore the potential uses of an Ohio Legacy Trust, the income and estate tax consequences, as well as its use as a substitute for a standard prenuptial agreement. The ethical responsibilities attorneys have regarding the use of Legacy Trusts are also explained. The final portion of Section III examines the impact Legacy Trusts will have on Ohio creditors, as well as the benefits and negative implications they could have on Ohio. Section IV examines whether APTs actually work and analyzes the arguments that creditors commonly use to attempt to defeat them.