What Could You do With an Additional $339,000?

What Could You do With an Additional $339,000?

A neurosurgeon was looking for additional ways to defer tax beyond the traditional 401(k) and cash balance plan. We recommended a Restricted Property Trust (RPT) to her. Over the next 10 years, she will be able to save $840,000 in tax. She will pay $501,000 in year ten. So, net tax savings for her will be $339,000 with potential tax-free income of approximately $2,985,520.

What is a Restricted Property Trust?

The Restricted Property Trust (RPT) is an employer-sponsored plan that provides tax-favored long-term cash accumulation and income distribution. RPT is perfect for business owners who want to reduce income tax and increase tax deferral with the potential of tax-free income later in life.

The benefits of RPT for business owners include:

  • Reduced taxable income
  • 100 percent tax deductible to the business or partnership
  • 70 percent tax deductible for the participant
  • Flexibility of choosing who participants
  • Plan assets fully protected from creditors
  • Continuity of business guaranteed through a death benefit
  • Contributions not influenced by existing qualified plans
  • Can be used by any individual selected by a trustee

RPT provides a stable, conservative platform for businesses to reduce their taxes and potentially appreciate assets. This tax saving plan is ideal for financial firms, medical groups, high-profit partnerships, private companies with executives earning above $500,000, C-Corps, S-Corps, and LLCs.

How It Works

  1. An employer establishes two irrevocable trusts known as the Death Benefit Trust and the Restricted Property Trust.
  2. The Taxpayer agrees to make contributions to the Death Benefit Trust in accordance with a Death Benefit Agreement entered into between the Taxpayer and employee.
  3. Fully tax-deductible contributions are made by the business to the RPT for a select group of participants. Of this, a portion is considered current taxable income to the participant. The remaining contribution funds a life insurance policy.
  4. The participant recognizes income on policy cash value in excess of value created by 83(b) election and Economic Benefit costs. Tax due is paid from policy values.
  5. After the policy is distributed, the participant can maintain it for the death benefit, use it to generate non-taxable cash flow, exchange it for a larger income stream (annuity) or potentially exchange it for a larger guaranteed death benefit.


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