Ohio Eases Rules on Transference of Wealth with Enactment of Family Trust Law
Ohio has joined 15 other states that permit the creation of family trust companies with its recent enactment of the Ohio Family Trust Company Act (“OFTCA”). Ohio Family Trust Companies (“OFTCs”) are highly effective tools for families of significant wealth to preserve their assets from federal income, gift, estate and generation-skipping tax consequences. OFCTs allow for family involvement in decision-making and control over the investment assets. They also serve as a vehicle for younger generations to become educated about the family’s assets and trained in governance issues.
Prior to the OFTCA, families interested in setting up a family trust company had to look outside the state of Ohio. Now that the OFTCA is in effect, a win-win situation exists for Ohio families and the state of Ohio. The OFTCA secured a home-court advantage for families by eliminating travel and set up costs families once had to incur from operating out-of-state family trust companies. Since there is no requirement to live in the state where the family trust company is established, Ohio has an opportunity to attract families from other states to bring their business and investments into Ohio.
Generally, there are two varieties of OFTCs; licensed and unlicensed. A licensed OFTC permits services to a broad range of clients but must abide by capital, insurance, pledge and nexus requirements. An unlicensed OFTC limits services to only family members but offers notable advantages, such as not being subject to banking regulations and no requirement to register with the SEC as a Registered Investment Advisor. The only obligation an unlicensed OFTC has is the annual submission of an affidavit to the Department of Financial Institutions confirming compliance with statutory limitations.
Families with significant wealth and succession concerns should carefully consider the advantages of OFCTs under the new law. This looks to be a game changer!
If you have any questions about the new OFTC legislation, please contact Mansour Gavin’s Estate Planning Group.
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