Successful business owners are taking advantage of restricted property trust to be able to grow their assets and at the same time, reduce their income taxes. Restricted Property Trust is a nice alternative to employer sponsored plans for it allows Defer Taxes on Growth, Before Tax Contributions as well as Access Tax-Advantaged Distribution.
On the other hand, it is important to be mindful that this trust isn’t for everyone. It is due to the reason that to have an RPT or Restricted Property Trust, you need to make a minimum of 50,000 dollars initial funding for 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.
RPT is basically an employer sponsored program mainly for business owners. This may be established by Partnership, LLC, C Corporation or S Corporation. However, a sole proprietorship can’t establish such. The main goal of RPT is to provide business owners with tax-favored contributions, non taxable income as well as long term accumulation. RPT may deliver better results when compared to alternate investments earning.
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. As for the annual contributions to RPT by business, it would 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. So long as the funding period has been met and distribution of policy to participant took place, then a small percentage of the cash surrendered value will be taxable. As for the taxable portion, it could be paid from the policy cash values. To be able to recognize any corporate deduction in specific fiscal or calendar year, it then becomes the member’s responsibility to fund the 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.