Contributions from the employer to the restricted property trust are used to purchase a whole life insurance policy. Whole life insurance is a low risk asset class like a certificate of deposit cds money market or treasuries.
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Are these things legal.
Restricted property trust life insurance. Failing to file form 8886 for vebas like sea nine veba or any 419 section 79 small captives or restricted property trusts creates multiple penalties. Since we are using whole life insurance in order to qualify for the deduction there must be a reasonable business need for the life. When contributions are made to the restricted property trust the trustee makes a payment to the whole life insurance company.
That contribution will be used to fund a whole life insurance policy creating cash value and an instant death benefit for the business owners estate. Life disability long term care health interesting ideas are being touted as the latest and greatest uses of life insurance for obtaining enormous tax. Annual contributions to a restricted property trust are fully deductible to an employer and partly taxable to a participant.
Assuming distributions begin in year 16 or at bobs age 66 it easy to decide which strategy makes the most economic sense. Restricted property trust jeff gerber ins. The whole life insurance policy provides annual non taxable cash flow of 86925.
The claim is that the premiums are deductible to the corporation and 70 tax free to the business owner. Somethings not passing the smell test. Fully tax deductible contributions are made by the business to the rpt for a select group of participants.
Trust and the restricted property trust. Taxable investment cash flow analysis. A restricted property trust rpt helps highly taxed business owners reduce income taxes with tax favored long term cash accumulation and income distribution from a conservative vehicle.
The use of a whole life insurance policy is necessary within the restricted property trust. The form irs form 8886 is required for all taxpayers who participate in a listed transaction such as a multiple employer welfare benefit program or 419 plan. Im a life insurance agent that has been approached by someone about selling large whole life insurance policies using restricted property trusts.
The use of whole life insurance is what allows the business owner to recognize the deduction. Most of this contribution will be tax deductible to the business owner because of the nature of the restricted property trust. Restricted property trust vs.
A restricted property trust can be used in addition to or as an alternative to a company sponsored retirement plan. The trust owns a whole life insurance policy which allows for tax deferred growth on the appreciation of the cash value. 2axpayer agrees to make contributions to the death benefit trust in accordance the t with a death benefit agreement entered into between the taxpayer and employee.
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