Restricted Property Trust (RPT)
How Does An RPT Work?
- Business Owner decides on contribution amount (5 year min. commitment – at least $50,000)
- Contributions placed into a participant-owned Whole Life Insurance Policy
- Business receives 100% tax deduction on the contribution
- Participant pays income tax on 30% of the contribution amount
- Cash Value builds inside the Life Insurance plan (approx 7-8% equivalent yield)
- At end of contribution period, taxes due on extra 70% contributed + growth inside the plan
- Excess Cash Value inside the Life Insurance plan used to pay taxes
- After taxes paid, participant owns a paid-up Whole Life Insurance Policy with excess cash
- Excess cash can be taken income-tax free as a “loan” or left in the plan
A Restricted Property Trust (RPT) is an advanced employer sponsored plan designed exclusively for the business owner and/or high-income key executives and employees.
RPT Features and Key Benefits
- 100% of the contribution goes to the participant
- Business receives 100% tax deduction on the contribution
- Participant pays tax on 30% of the contribution amount
- Business owner decides contribution amount (no contribution limit)
- Plan assets are protected from creditors
- Contributions do not interfere with or limit other qualified plan assets or contributions
- Investment vehicle is very conservative and predictable
- A death benefit is provided for family or partners
- Exclusive: an RPT may be just for the benefit of the business owner(s) and/or key personnel
RPTs Address the Following:
- Contribution Limits in Qualified Plans (401(k), SEP, etc …)
- Current and Future Tax Rates
- Inconsistent Investment Returns
- Asset Protection (using Cost-Effective Life Insurance Plan (and its tax-advantages))
- Benefit Segregation (Exclusive Benefit for the Business Owner(s) / Key Employee(s) only)
- Underfunded Retirement Plan
RPT Restrictions
- Fixed contribution amount (minimum annual contribution is $50,ooo)
- Minimum term of 5 years
- Failure to comply results in amounts accumulated being forfeited and donated to a client directed charity
- Funds are Illiquid during chosen term length
- Assets never revert back to the corporation
RPT Ideal Candidates
- Consistent Business Income ($1 million+ / year)
- High Tax Bracket (for participants)
- Maxing Out Qualified Plan Contributions
- Need Tax-Advantaged Plans
- Are in Relatively Good Health
- Looking for Low-Risk, High ROI Strategies