Are you getting married soon and want to ensure that the assets that you accumulated prior to the wedding date are protected in the event that the marriage does not work out? Let us help you navigate the various options and put an effective plan in place! The two primary planning techniques for fiancés in Ohio are Premarital Agreements and Ohio Legacy Trusts (aka Domestic Asset Protection Trusts):
A Premarital Agreement (sometimes called prenuptial, ante-nuptial, or just a prenup) is essentially a contract between a man and woman who intend to marry. These agreements primarily govern the division of assets in the event of divorce or death, but can also address a whole host of other matters, including: ongoing support, continued health insurance, or even use of a family vacation home. They are enforceable in all fifty states, including Ohio, provided that all the following conditions are met:
- they are in writing;
- each party has fully disclosed his or her assets and income;
- each party is represented by separate counsel;
- the agreement was not entered into by fraud, duress, mistake, misrepresentation, or material omission; and
- the agreement was not unconscionable when made.
An Ohio Legacy Trust (aka Domestic Asset Protection Trust) is a relatively new planning technique permissible since March 27, 2013, when Ohio passed the Ohio Legacy Trust Act, R.C. Chapter 5816. These trusts, if created and funded prior to the date of marriage, are a viable alternative to a traditional prenup because:
- there is no requirement for full disclosure of financial assets and liabilities;
- they can be created by one fiancé alone without the knowledge and consent of the other fiancé; and
- after 18 months the trust assets are protected from other creditors, not just a future ex-spouse.
While an Ohio Legacy Trust has many benefits, it is not a perfect solution for everyone since:
- the Settlor (i.e. the person creating the trust) must relinquish substantial control over the trust assets to a third-party trustee (the Settlor can be the primary beneficiary, retain the ability to access a certain portion of the assets and void distributions, but they cannot serve as their own trustee);
- the Settlor cannot place all their assets into the Legacy Trust rendering them personally insolvent;
- the Settlor should only place assets that they do not need on a regular basis into the trust since they must to go through the trustee to access them; and
- the Settlor must publicly disclose the assets transferred to the Legacy Trust through a filing with the County Fiscal Office.
Please see my article in the Cleveland Metropolitan Bar Journal for a more detailed explanation of using an Ohio Legacy Trust for premarital planning:
Protecting Premarital Assets: Is an Ohio Legacy Trust the Answer?, Cleveland Metropolitan Bar Journal, December 2018
A detailed analysis must be completed based on your unique situation and assets to determine which approach is best for you. It may be that a hybrid approach of a prenup with an Ohio Legacy Trust would provide the best protection for you upon entering a new marriage. Please call us today for an appointment.