Restricted property trust is being used by a number of successful business owners in an effort to reduce their income taxes and at the same time, to grow their assets. Being able to make Defer Taxes on Growth, Before Tax Contributions as well as Access Tax-Advantaged Distribution has made Restricted Property Trust a remarkable alternative to employer sponsored plans.
On the other hand, you need to know that this type of trust is not for everyone. The initial funding needed for RPT or Restricted Property Trust is at least 50,000 dollars per year on the next five years. Failing to make the yearly contribution would only result to forfeiture of the plan assets to predetermined charity of the choice of owner. If you feel concerned about the minimum requirement being asked, then it may not be the best option for you.
Basically, RPT is an employer sponsored program mostly for business owners. Not only that, this may also be established by Partnership, LLC, C Corporation or S Corporation. However, a sole proprietorship can’t establish such. The primary goal of RPT is delivering business owners with tax-favored contributions, non taxable income as well as long term accumulation. If you are going to compare it to alternate investments earning, RPT is capable of providing you with better outcomes.
It is important to take note that RPT is not a qualified plan and for this very reason, the contributions for RPT have no impact on the qualified plans contribution including 401k, Profit Sharing Plan, Defined Benefit Plan, SEP and so forth.
Not like other qualified plans, RPT might be utilized exclusively in benefiting owners of a company. Each and every participant can choose their contribution level that’s comfortable to them. The yearly contributions to RPT by business will be deductible to employer. As for the taxable income of the participant, there is a small percentage of contributions included.
Not being able to make a yearly contribution would result to lapsing of life insurance policy and at the same time, the forfeiture of policy cash values to the preselected charity. As long as the funding period has been satisfied and the distribution of policy to participant has taken place, then a small percentage of cash surrendered value would become taxable. In relation to the taxable portion, this one can be paid from policy cash values. In order to recognize any corporate deduction in specific fiscal or calendar year, then it becomes the responsibility of the member to fund Restricted Property Trust by the yearend of the businesses.
RPT candidates can be anyone from medical groups, high profit partnerships and private companies or executives with more than 500k dollars annual earning.