The Ohio Legacy Trust permits the person who establishes the trust and transfers assets to the trust to be a beneficiary and protect the trust assets from their own future creditors. This is a significant change in the law and a powerful planning opportunity.
Here is a familiar scenario: A young adult is a beneficiary under a trust established by his or her grandparents or great-grandparents. The trust was created during an era when age 25 or even 21 was generally agreed to be an appropriate age for a member of the next generation to come into their inheritance. The trust investment strategy has been wildly successful – and the young beneficiary is about to receive a distribution of several hundred thousand dollars – or even several million dollars – though he or she is barely old enough to vote. Many young adults in this situation are persuaded to place the assets in further trust, naming a parent as Trustee, receiving distributions as needed but postponing the receipt of outright distribution to a later age, perhaps 35 or 40.
Apart from the shift in trusts, there has been another significant shift, not generally understood. This is the loss of creditor protection. It is likely that the initial trust contained a “spendthrift” provision, designed to protect the trust assets from the beneficiary’s creditors. Once the assets are distributed – even though transferred into further trust – that protection has traditionally been lost.
Enter the Ohio Legacy Trust – the beneficiary can establish an Ohio Legacy Trust, retain significant rights and benefits with respect to the trust assets – and protect the assets from their own future creditors, including (in many cases) the claims of a divorcing future spouse.