A retirement trust offers protection for your retirement funds and your beneficiaries. For many individuals, a significant portion of their assets are part of a retirement account to which they have made contributions throughout their working years. Unfortunately, all of these retirement savings could be lost to a lawsuit or a creditor. However, California offers its residents a way to protect their assets — The Private Retirement Plan.
The Private Retirement Plan (PRP) is a proprietary trust that was created under California state law CCP 704.115. The PRP enhances and supports state exemptions for private retirement plans. It offers asset protection to participants as well as providing a way to maximize benefits, as long as those assets are designated for retirement.
A Private Retirement Plan can be funded with almost any kind of valuable asset such as real estate, stocks, mutual funds, savings, life insurance, annuities and more. There is no limit on how much you can contribute into the plan as long as the need for sufficient retirement assets is correctly documented.
A PRP is a great option when it comes to providing solutions to and benefits for a variety of planning needs, including comprehensive estate planning, business planning and executive compensation planning. Not only are assets held in the trust protected from lawsuits, creditors, and bankruptcy, but so are distributions taken out of the trust provided they can be traced back to the trust.
How different is it from other trusts?
The Private Retirement Plan is a unique estate planning vehicle because it provides true asset protection due to the fact that all of the assets contributed into the trust are exempt from creditor judgments and a bankruptcy trustee.
A PRP is an irrevocable grantor trust, but unlike an irrevocable estate trust, it is a non-gifting trust. Instead, you’re contributing assets to your own trust. You are the primary beneficiary and will receive retirement benefits during your lifetime.
You can designate a contingent beneficiary in your plan document as long as the trust is properly administered, your beneficiary or beneficiaries can continue to have asset protection on survivor benefits during their lifetime.
A Private Retirement Plan cannot be self-settled in California. Instead, a business or employer must be the settlor or sponsor of the trust. Additionally, if you wish to transfer assets into the PRP, they must first be “re-characterized” from non-exempt to exempt in order to have true asset protection.
With the right guidance and management, a Private Retirement Plan can provide you with great asset protection throughout your retirement. Unlike other financial options, a Private Retirement Plan provides you with a way to protect your hard-earned wealth.
California attorney, Jeffrey Verdon, has been practicing taxation law as well as comprehensive estate planning law with asset and lifestyle protection planning for over 30 years. To learn more about Private Retirement Plans and other asset protection trusts, contact Jeffrey M. Verdon Law.