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Trust Formation in Ohio

Trusts are used for a variety of reasons such as to provide for a person during their lifetime, to provide for a person or people after another’s death, to avoid probate, and to maintain privacy among countless other reasons. Ohio has various types of trusts that can be set up by a person planning for the future. Trusts can be inter vivos trusts or testamentary and revocable or irrevocable.

Basic Trust Terminology

  • Grantor – the person that is setting up the trust.
  • Beneficiary – the person(s) that benefit from the trust.
  • Inter vivos – during the grantor’s life.
  • Testamentary – after the grantor’s death.
  • Trustee – the person that takes care of and manages the trust.

Inter Vivos and Testamentary Trusts

An inter vivos trust, commonly known as a living trust, is one that is established during the grantor’s lifetime. A testamentary trust is on that is established after the grantor’s death. A inter vivos trust may be set up to benefit the grantor during their lifetime or may be set up to provide support for another beneficiary during the lifetime of the grantor. A testamentary trust is never to provide support for the grantor, as it is not established until the grantor’s death. A testamentary trust may be to support loved ones of the grantor after the grantor’s passing.

Revocable and Irrevocable Trusts

A revocable trust allows the grantor to change the trust or terminate the trust all together. This is a common type of inter vivos trust and the assets placed in a revocable trust are still considered the assets of the grantor. An irrevocable trust is similar to the grantor making a gift in the sense that the grantor cannot alter or terminate the trust. Assets placed in an irrevocable trust are not considered the assets of the grantor. The type of trust formed can affect the grantor’s eligibility for Medicaid.

Purpose of Trust Formation

The reasons that a person may desire to form a trust are varied depending on each individual’s situation. Forming a trust can assist in avoiding probate after the grantor’s death which can help save time and money. Another reason is to ensure that a loved one is provided for after the grantor’s death. Trusts also help protect the privacy of the grantor as it is not typically made part of the public record of the Courts. Additional considerations that lead to trust formation include estate tax consequences and Medicaid eligibility.

Trusts to Provide for Minor Children

One of the biggest concerns of parents with young children is that their children will be provided for if something should happen. If children are under the age of majority (18 in Ohio) it may be beneficial to establish a trust to support them in the event that both parents deceased. The trust is managed by a trustee until the children reach the specified age, and at that time, the trust can be paid out to the children in full.

Due to the complex nature of trust formation and tax and estate law, it is important to contact a licensed Ohio attorney to see if forming a trust would be the best option for you.