The great outdoors breath taking views and amazing diversity makes California a wonderful place to live. However, the Golden State does have it drawbacks, especially when it comes to taxes and protection from creditors and litigation. California has the most debtor friendly laws in the nation, or as the National Federation of Independent Business calls California, a “judicial hell hole.” Fortunately, there is a solution to this huge problem. In this article you will learn how the citizens of CA can use their rights and protect what they have worked so hard to create. The simplest and easiest way to exercise this right is by setting up a “Private Retirement Plan.”
So what does a “Private Retirement Plan” actually mean?
Private Retirement Plan (PRP) is a savings and asset protection plan authorized under the California Code of Civil Procedure under section 704.115. PRP legally shieldsthe ‘assets’that are part of the plan from bankruptcy and judgments.
The ‘assets’ in the PRP, refer to a group of assets that have been set aside for your future use in retirement. These assets could be stocks, bonds, savings, rental properties, business interest, private stock, life insurance or any other appreciating asset. There are items that cannot be placed inside the private retirement plan, such as your personal residence or your personal vehicle.
Well, how does it actually work?
Here is an example of how the plan can work.
Aphysician practicing in the state of California wishes to protect his years of hard work and decides to create his own Private Retirement Plan.In this case, the assets earned by practicing medicine can be put under the cover of the plani.e. PRP plan. Theseassets are completely ‘out of reach’ from the physician’s creditors, as long as they are kept in the plan.
Who all can get benefitted from the Personal Retirement Plan?
PRP is a perfect planning tool for all those professionals who have delayed their retirement goals and financial planning, as well as those people who want to gather funds for their retirement in aprotected trust which is less susceptible to business risk and frivolous spending.
Some of the individuals who fall under these both the categories are executives, business owners, professionals, chartered publicaccountants, doctors, etc.
What are the benefits of Personal Retirement Plan?
We have jotted down potential benefits that make PRP the ‘absolute’ asset protection strategy for the Californians:
• Immediate Asset Protection: Private Retirement Plan is an effective vehicle that provides immediate protection of assets. The assets when protected under this very plan are exempt from bankruptcy and have total protection from judgments.
• Unlimited Contribution: The private retirement plan does not set any limitations on the amount of money that can be contributed.Thus, the participant can enjoy the privilege of unbounded contribution.
• No Annual IRS Filings: Yet another advantage of a taking up a PRP is that there is no need for annual Internal Revenue Service filings (IRS).
• Wide Variety of Assets:There is no restriction on the type of investments that you can cover in the plan. Thus, a large variety of assets like rental properties, stocks, savings and many other sorts of investmentsqualify for retirement purposes. Additionally, you can put these investments into any financial institution of your desire as well.
• No need to cover your employees:In PRP, no rule regarding employee coverage is mentioned. So, you can solely enjoy all the benefits of your Private Retirement Plan.
PRP is a comprehensive subject matter on which I can go on and on. But for starters, I hope you’ve had a bit of clear understanding about it.
It is always advisable to get a legal help form an attorney if you are planning to get a Private Retirement Plan. The attorney will handle all the documentation along with actuarial calculations and would watch out for any and every uncertainty of the law for the lifetime of the plan. For any more queries, feel free to contact Trust-CFO.