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Proposed legislation designed to slow retiree exodus

Special to the Legal News

Published: April 6, 2012

Pitched as both a “jobs bill” and a way for residents to protect their assets, House Bill 479 would establish the Ohio Legacy Trust Act.

The initiative, also known as the Ohio Asset Management Modernization Act, is backed by Reps. Christina Hagan, R-Alliance, and Lou Blessing, R-Cincinnati.

In sponsor testimony last week before the House Judiciary and Ethics committee, Hagan said HB 479 is designed to modernize Ohio’s legal infrastructure in the areas of trusts, asset protection and business.

She said the mission is to have the state become “one of the leading trust, asset protection and business jurisdictions in the United States and the world.”

“This legislation has two purposes,” Hagan said. “First, it will allow Ohio citizens, business owners and entrepreneurs to better protect their hard-earned assets, homes and businesses.

Second, it is a “jobs bill” that will put in place the legal infrastructure necessary to permit Ohio financial institutions, professional service firms and other businesses to effectively compete in the newly and rapidly developing worldwide, trillion dollar trust and fiduciary services marketplace.”

If the proposal is enacted, Hagan said, it could potentially create and retain thousands of jobs and revenue for the state.

The lawmaker said experts believe that adopting a Domestic Asset Protection Trust statute could help put Ohio at the forefront of a growing business that has been “proven to be a substantial economic driver.”

Hagan said HB 479 contains “key components” such as increasing the homestead residence exemption and instituting other technical and legal changes designed to clarify property rights.

“Our hope is that Ohioans who are able to keep more of what they have worked hard to earn will be more likely to keep and invest it here in Ohio in our financial institutions,” she said.

The bill calls for a task force for trust administration, review and reform. The proposed entity annually would monitor Ohio’s status as a trust, asset protection and business jurisdiction and recommend changes and updates.

“OAMMA is the first integrated legislative proposal of its kind for Ohio and is the result of years of study by leading experts from Ohio in this field,” Hagan said.

She added that the bill is modeled after legislation that other states successfully have implemented.

“We wanted to ensure that Ohio could effectively compete in the newly developing ... marketplace and to the related services that this business is creating,” Hagan said.

The efforts to have HB 479 signed into law have been backed by members of the legal community.

“For many years, asset protection in the United States consisted largely of moving to Florida or Texas with their more-or-less unlimited homestead exemptions, or moving assets to jurisdictions outside of the United States,” said C. Lawrence Huddleston of the Huddleston Law Group, a boutique firm specializing in estate planning and family business services.

Huddleston offered proponent testimony for HB 479 in his capacity as vice president of the Ohio Forum of Estate Planning Attorneys.

“South Dakota was the first state to begin re-examining its trust laws in the wake of the dramatic run-up of the stock market in the 1990s,” he said.

“They updated, among other things, their Rule Against Perpetuities ... that frustrated the creation and enforcement of multi-generation trusts.”

Huddleston said South Dakota’s goal was to create a legal environment for expansion of banking and trust business.

“Apparently it worked, as a number of states began to eliminate their Rules Against Perpetuities. Ohio was not the first to follow, but eventually permitted citizens to elect out of the arcane and confusing rule,” he said.

Huddleston went on to say that HB 479 contains needed “technical correction provisions to tighten and clarify the language” in Ohio’s “opt-out” Rule Against Perpetuities.

“Over the past two or three years, a small group of Ohio experts in estate planning, asset protection and tax law have worked to craft legislation that will combine the “best of the best” provisions for attracting business and wealth-generating persons, and inducing them to remain in Ohio rather than move to other states to protect whatever wealth they may create in Ohio,” he said.

“As a practicing lawyer and expert in my field, it would be malpractice were I not to explain to clients, especially in retirement, of the attractiveness of Florida and Texas laws: essentially unlimited homestead exemptions, no income tax and no estate tax.”

Huddleston said many of the state’s “snowbird” retirees opt to change their formal residences from Ohio to Florida.

“Ohio tried to reduce the retiree exodus by decreasing the number of months one had to stay out of Ohio in order not to be considered an Ohio resident for estate tax purposes, but there has been no discernable effect on client behaviors in our office from that legislation,” he said.

“It is burdensome to require citizens to keep calendars of travel, change driver license registration and voting registration and take other steps to prove they are not residents of Ohio.”

Huddleston said his well-to-do clients who abandon Ohio residency sometimes are prompted by the difference in Ohio and Florida/Texas laws to sell their large Ohio homes in favor of smaller homes or condominiums and then purchase larger homes in Florida or Texas.

“... They know the Florida and Texas homestead laws protect primary residences from lawsuit creditors,” he said. “HB 479 will remove that motivation to sell or downsize Ohio homes.”

Huddleston said attracting business creators and professionals requires laws that make such individuals feel welcome and protected.

“Although the Ohio Forum does not have statistics to prove that business creators, professionals and others are dissuaded from moving to Ohio because of the lack of a competitive homestead exemption, it is logical to assume that a law that encourages life-long residents to leave Ohio will also serve to dissuade others from choosing Ohio as a place to live, work and create businesses,” he said.

Hagan said she and Blessing are pleased to have introduced HB 479.

“You can understand the shared enthusiasm of Rep. Blessing and myself, as we all are actively seeking ways to create a better business climate in the state of Ohio,” she said.

HB 479 has gained partisan, Republican support from Reps. William Batchelder, Randy Gardner, Cheryl Grossman, Gerald Stebelton, Barbara Sears, Terry Boose, Rex Arthur Damschroder, Kirk Schuring, Lynn Wachtmann, Terry Johnson, Peter Beck, Anne Gonzales, Louis Terhar and Ron Amstutz.

The bill has yet to be scheduled for a second hearing.

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