Domestic Asset Protection Trust or a Prenuptial Agreement: An Important Question to Consider When Combining Households and Families
Today I want to talk to you about the issue that many of my clients face when combining families as the result of a remarriage.
Combining households later in life can be tricky. Whether it is remarriage after the death of spouse, or after a divorce, there are issues that must be handled delicately. First, you want to make sure that your children are happy with your decision. Second, you want to protect yourself in the event of a divorce or separation. Finally, you want to protect your family in the event of your death so that the assets you spent a lifetime building end up with your children and not the family from an earlier marriage of your spouse.
Many times, families believe that rushing to put in place a prenuptial agreement is the correct way to go. However, in some circumstances, this may not always be the correct way, and it may be even a disfavored way to proceed. The most important reason is that prenuptial agreements can be challenged in court. In fact, the following is a list from a 2014 Huffington Post article on the top ten reasons prenuptial agreements are challenged and set aside in a divorce proceeding:
- No independent legal representation
- Duress
- Signed too soon before the wedding
- No full disclosure of assets, properties, and debts
- Includes child support provisions
- Contains unconscionable terms
- Contain unenforceable provisions
- Not contained in writing
- Contains ambiguous terms
- Making promises, but not keeping them resulting in fraud
As you can tell, there could be several landmines when it comes to prenuptial agreements. Therefore, before you consider establishing a prenuptial agreement, make sure that you have reviewed the matter with a knowledgeable and experienced attorney.
The Ohio Legacy Trust
If a prenuptial agreement appears to be the wrong choice for you when combining families through a second marriage, what is the right way to proceed? A second option to consider would be a Domestic Asset Protection Trust, or an Ohio Legacy Trust as they are called in Ohio.
An Ohio Legacy Trust allows a person to establish an Irrevocable Trust, and name a third-party to be trustee, that is nearly impenetrable to creditors. The following are the requirements of a valid Ohio Legacy Trust:
- Must be in writing
- Must nominate an Ohio trustee
- The trust must be irrevocable
- It must contain a spendthrift clause (legal phrase meaning that it limits how the trust assets are to be used)
- It must be governed by Ohio law
- The grantor (creator of the trust) must sign a solvency affidavit that the creating and funding the trust will not render the grantor insolvent
When these trusts are created properly and are subject to certain time restrictions for certain creditors, the assets of the trust can be safe from creditors, lawsuits, predators, and even spousal claims in divorce.
For More Information
Before you decide that an Ohio Legacy Trust is for you, it is best to speak with a knowledgeable and experienced estate and asset protection attorney to determine your options. As this type of strategy is complex, it is important to speak with an attorney who has experience in this type of area of law.
Make it a gift to your family by providing them with the protection that they deserve. Plan your estate today, so you can leave a lasting legacy tomorrow.