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+++++++++++++++++++++++++ + +++ + BUSINESS SECTION U +++ +++++++++++++++++++++++++ Asset Protection Opportunity for Physicians By David W. Woodburn ON MARCH 27, 2013, the Ohio Legacy Trust Act (Act) went into effect. The Act is a monumental development in the ever-changing world of asset protection law and allows Ohio to step to the forefront in this area. In particular, the Act presents a wonderful, new planning opportunity for physicians to shelter assets and protect their net worth from creditor claims. The Act marks a monumental step forward in Ohio by enabling individuals to set aside assets in trust and still retain a beneficial interest in the trust. While this approach was often associated with offshore trusts or other domestic asset protection trusts in other states, Ohio now permits its own version for consideration. Perhaps the most important provisions of the Act center on the ability of an individual to transfer personal assets into "self-settled" trusts, of which the creator/settlor can be a beneficiary. Such trusts may permit the grantor (e.g., creator) of the trust to receive income or principal from the trust — including a right to withdraw up to 5 percent of the value of the trust principal each year, in addition to other permitted distributions specified in the terms of the document. A grantor may also retain the right to: (1) veto a distribution from the trust; (2) exercise a power of appointment to remainder beneficiaries; (3) remove any advisors to the trust; and (4) remove any trustee. Thus, the grantor can 36 | Cleveland/Akron/Canton MD NEWS retain significant influence over his or her interest within the trust, subject to the spendthrift provisions, which prevent a creditor from attaching the grantor's interests. Of particular importance, the Act generally prohibits a creditor from bringing an action against any person who transfers assets into the trust, as long as the creditor did not have a claim prior to the creation and funding of the trust. Under the Act, the grantor must execute an affidavit which specifies the following: (1) the transferor does not contemplate filing for relief under the bankruptcy code at the time; (2) the transferor is not involved in any administrative proceeding; (3) the property being transferred into the trust was not derived from an unlawful activity; (4) the transferor has full right and authority to transfer the property into the trust; (5) the transferor will not be rendered insolvent after the transfer; (6) the transferor does not intend to defraud any creditor; and (7) there are no threatened or pending court actions against the transferor (other than identified in the affidavit). By forming and funding the trust, and executing the aforementioned affidavit, creditors of a grantor are generally precluded from attaching trust assets. Exceptions to this proposition include child support obligations to be collected from the trust and alimony and support to be paid from trust property consisting of assets placed in the trust after marriage. Please note that if the I MDNEWS.COM I SEPTEMBER- OCTOBER 2013 trust was funded prior to the grantor's marriage, assets may be protected from claims of a spouse or former spouse. Thus, this trust may be a useful planning tool prior to marriage as an alternative to or in conjunction with an antenuptial agreement. For physicians, the Act creates a unique opportunity to shelter assets without having to place them in trusts overseas or in other domestic jurisdictions (i.e., Delaware, Alaska). More so, the trust provides flexibility in who may serve as trustee (one may use an Ohio citizen) and thereby permits the grantor to have a greater comfort level in forming the trust and giving up control of the assets used to fund the trust itself. Individuals, such as physicians, who have high liability or exposure are perfect individuals to be exploring the use of the legacy trust and how it may fit within their overall estate planning and asset protection planning. Given the significance of the Act, it is important for individuals seeking asset protection to meet with estate planning counsel who deal with complex asset protection planning techniques and discuss the opportunities that the new law permits. David Woodburn is an attorney with Buckingham, Doolittle & Burroughs LLP in Canton, Ohio. He is a partner and chair of Buckingham's Trust and Estates Practice Group. For more information about the law firm, go to www.bdblaw.com or email Woodburn at DWoodburn@BDBLAW.com. I