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What Is a Restricted Property Trust and How Does It Work?

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Trusts as a wealth accumulation and protection instrument may be crafted for successful business owners who want to save more money for retirement than what is possible with a typical retirement plan, and to do so on a tax-deductible basis. As opposed to a typical retirement account, a trust also lets the business owner legally “discriminate” against employees or co-owners, if any, and to exclude everyone else in the plan. Such a trust is known as “Restricted Property Trust”

A high-income business owner may fund anywhere from a minimum of $50,000 to millions of dollars yearly for no less than 5 years into a restricted property trust. For example, if the businessman contributes $100,000, most of it will be tax deductible to them as per the very nature of the Restricted Property Trust.

This contribution will be used to finance a Whole life insurance policy, generating cash value and an automatic death benefit for the owner’s estate. Should the businessman pass away within the five 5 years period (or the next 5-year periods of the trust’s operation), the death benefit ends funding of the trust and the family keeps any balance of the death benefit. Read more here :

The business owner commits to fund the trust for the same 5-year period with $100,000 annually. Should he fail to honor that commitment, all previous contributions will be forfeited and donated to a charity. This brings a chance of loss needed for most of the said contributions to be tax deductible.

Around 70% of the $100,000 contribution will be tax deductible yearly, depending on the details of the situation. In more than 10 years, this would lead to tax deductions worth $700,000 straight off of the business’ income, which means, depending on the effective tax rate, hundreds of thousands of dollars will land in the business owner’s pockets. Here is more info concerning the restricted property trust.

As well, at the end of the 10-year period in this particular example, the business owner will have more cash value in the plan than what he put into it. Assuming the businessman put in $1,000,000 within a span of 10 years, $1,200,000 in cash value would have been in the plan and the life insurance policy. With the trust collapsed, the owner will possess the life policy personally as well as all the cash and death benefits. He would have also earned hundreds of thousands in dollars of cash that would have simply gone to taxes, if not for the unique and effective structure of the Restricted Property Trust. View here for more :