Protect Your Retirement Using a Private Retirement Plan | TRUST-CFO®

Protect Retirement With a Private Retirement Plan

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Protect Your Retirement With a Private Retirement Plan

An old law with progressive benefits
Since 1970, California law has provided its residences with an almost unmatched opportunity to protect their retirement savings and hard-earned assets from creditors, bankruptcy, lawsuits, and business risks. While other retirement savings strategies focus on tax deferment, Private Retirement Plans use exemption rights under state law to protect assets, so that you can actually meet your retirement goals.

Extremely flexible: Few restrictions, no limits
To qualify, assets contributed to a PRP must be designated for your use in retirement. There are few restrictions on what type of asset can be placed in the trust and no limit on the amount you contribute to the trust. A PRP does not require you to purchase anything, sell anything, or contribute any funding beyond the assets you wish to protect. With no cap on contributions, PRPs are a great option for high-earning individuals who can quickly exhaust their limits on IRAs or qualified retirement plans.

Pro-business solutions superior to traditional retirement programs
PRPs provide individuals with pro-business solutions by improving cash flow and allowing control over private investment strategies. So whereas other federally regulated tax plans have little flexibility in investment options, a PRP can allow funding of private business stock, real estate with debt, private equity investments, or any other investment that’s legitimate for retirement savings.

Protection benefits stronger than an IRA
There are many ways in which PRPs are more advantageous than a basic program such as an Individual Retirement Account (IRA). But probably the most potent attribute of a PRP is that all funds, distributions, and death benefits are fully protected against creditors. Compare that to an IRA, where the funds are subject to a judge’s opinion under non-bankruptcy law.  Even under bankruptcy law, an IRA has an exemption limit of $1,000,000 (indexed up to $1,283,025 for 2018).

Setting up and operating a PRP is easy
When setting up a PRP, you need to make sure that your plan is drafted and operated properly. First, you need to choose a third party administrator, who is experienced and knowledgeable about PRPs. Your administrator will conduct an initial analysis to determine if you qualify for a PRP and what assets can be contributed to your plan. Next, your administrator will calculate your projected income gap at retirement to determine your future funding needs. Then, you must appoint someone who is not related to you or under your control, like an attorney, to be the trustee. Your PRP should be clearly documented, and delivered to the trustee and all plan beneficiaries.

Once your plan is drafted and assets are put into the trust, your administrator will monitor and review the trust annually to ensure compliance with the law. When you retire and begin to withdraw funds from the PRP, your administrator will make sure that payments are made properly, maintaining continued protection for you and your family. They will also report the net balance of funds that remain in the trust to ensure ongoing protection.

The benefits of a California PRP are abundant. If you haven’t heard of this option before, that may be because financial advisors and brokers do not make money from encouraging clients to protect their private assets in PRPs and, contrary to common belief, most financial advisors are not obligated to act as fiduciaries. However, now that you know about this exemption planning strategy to protect your wealth, you can take advantage of its unparalleled value to have a “complete” retirement program and preserve your overall wealth.

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