Private Retirement Plans in California: Crucial Strategy Missing in Your Retirement Savings and Wealth Management Plan
If you are lucky enough to live in the beautiful state of California, you also have the misfortune of living in the state ranked lowest for private asset protection. With ever-increasing lawsuits and aggressive financial planning tactics that try to hide, evade, or defraud creditors, there are few legitimate planning strategies that offer Californians true protection of wealth. Yet even with the nation’s highest taxes and little to no asset protection from creditors, Californians do have one powerful tool for retirement savings and wealth management: a Private Retirement Plans (PRP).
In this 3-part series, you will learn how any California resident can protect their private assets by virtue of them being actual retirement funds. This wealth protection planning strategy is not just for the “wealthy”—it can be used by anyone concerned with exhausting their traditional retirement plans, and who have accumulated additional wealth and wish to save these private assets for retirement on their own terms.
What makes a Private Retirement Plan different than any other retirement plan?
In short, almost all other retirement plans are tax-oriented, seeking to reduce current taxable income/earnings, whereas PRPs focus primarily on the exemption of private assets. Tax-oriented plans like IRAs center around tax deductions and deferrals. While PRPs can be designed to help fuel or foster tax benefits from funded assets, the contributions are not deductible nor are the distributions taxable to participants. It is therefore tax-neutral and also avoids negative tax-triggers such as the reassessment of property taxes. Most importantly, a PRP is designed as a total risk management tool to minimize overall wealth erosion risks.
The PRP can help mitigate some of these following risks:
In addition, PRPs can help provide a pro-business solution to private wealth management by optimizing capital, returns, and financing/debt risk management. At their core, many other retirement plans and investment vehicles are structured to benefit Wall Street and big banks, not the individual. PRPs, on the other hand, are designed to protect your wealth from market risks and maintain critical cash flow. Additionally, PRPs provide investment options for the assets contributed to your plan, such as funding business growth and real estate investment.
It is an uphill battle to try to control your wealth in an uncontrolled environment. Most individuals—even wealthy ones—are just one lawsuit or life catastrophe away from losing all of their wealth because it is unprotected and exposed to comprehensive and non-insurable risks. With a PRP, you can take control of your wealth by mitigating tax risks, lawsuits, and demands from unwanted creditors.
What are the economic benefits of a PRP?
A PRP provides many economic benefits over traditional methods, due to the nature of how it is funded, taxed, and protected. Whether you’re an extremely successful executive with $3 million in personal assets, or a small business owner who is substantially underfunded for retirement, a PRP allows you to exempt and protect a large portion of your private assets, as long as you can prove the need.
PRPs do not require any additional funding, selling, or purchasing of anything. They simply serve an administrative function. Proper administration is conducted with complete transparency, allowing you the freedom to enjoy the liquidity of your assets and maintain cash flow, while paying a transparent flat-fee rate.
Why haven’t I heard of a PRP before?
If you haven’t heard of a PRP in California before, it might sadly be because there is not a tremendous amount of profit to be made in the marketing of PRPs. The most popular and most advertised retirement plans are tax-oriented plans like qualified retirement plans or IRAs that seek tax deductions for plan contributions, whereas PRPs utilize exemption planning and protect private assets that already have inherent tax benefits.
How do Private Retirement Plans work in California?
In 1970, California passed a law exempting all trust assets from creditor attachment as long as the assets are designated for your future use in retirement. One the most advantageous elements of a PRP is that, unlike other retirement investment vehicles, restrictions on what assets can be placed in a PRP are very limited.
While other forms of “asset protection” employ a strategy of transferring ownership of assets, PRPs utilize this powerful tool under California law to shield assets from risks of creditors and lawsuits. PRPs are specifically designed to enhance, ensure, and enforce your legal exemption right to protect both employer and private funds and assets from lawsuits and creditor attacks.
Be sure to read part two in our series, Funding your future: The Difference Between Private Retirement Plans and Tax Oriented Retirement Plans (PART 2)