Private Retirement Trust Series: Asset Protection & Retirement Planning for California Residents

Part 1: Understanding Private Retirement Trusts in California

California’s Retirement Asset Exemption Is Broader Than Most Realize

Under CCP § 704.115, California offers an exemption that covers not just tax-qualified plans, but also private retirement plans that meet specific legal and practical criteria. A properly implemented PRT can shield assets within the trust, distributions paid from it, and even the death benefit.

Recent legislative changes such as AB 2837 have limited some protections for traditional retirement plans. In contrast, the PRT’s statutory protections remain intact. This has made the PRT an increasingly relevant strategy for high-liability professionals, business owners, and high-net-worth individuals.

Structure Must Reflect True Retirement Planning

Establishing a PRT is not simply a matter of paperwork. To qualify for the exemption, the trust must be formed by an employer, have an independent trustee or custodian, and be administered as a legitimate retirement plan. Asset selection is equally important. Only assets that are aligned with retirement purposes, such as investment real estate, business interests, or structured insurance, are appropriate.

One of the most important best practices introduced in this session is the Retirement Appraisal. This appraisal helps determine a defensible funding level based on retirement lifestyle modeling and expected needs through retirement age. Without this type of financial justification, the plan is vulnerable to challenge.

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Part 2: Planning a Retirement Purpose with Private Retirement Trusts

Courts Evaluate Conduct, Not Just Documents

In California, the legal system is clear: the PRT exemption applies only when the trust was created and used for a retirement purpose. Courts consistently look beyond the language in the trust document to evaluate the surrounding facts. This includes when the trust was formed, how it was funded, and whether the client’s overall financial behavior supports the stated purpose.

In this session, several cases were analyzed to show how the timing of trust creation and contribution patterns can impact whether the court upholds the exemption. Plans created just before litigation or funded with unusually large, irregular contributions are often viewed with suspicion. Consistency and credibility matter.

Retirement Purpose Requires Long-Term Alignment

True retirement planning involves more than labeling a trust as a PRT. It involves aligning the trust with actual behavior: making contributions over time, maintaining third-party oversight, and using professional advisors to help administer the plan. All of these elements support the argument that the PRT is part of a genuine retirement strategy rather than a last-minute protective maneuver.

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Part 3: Legal Logistics & Implementation of Private Retirement Trusts

The Planning Lifecycle Begins with Discovery and Analysis

The third session walks through the step-by-step implementation of a PRT. The process begins with understanding the client’s full financial picture, including solvency, liabilities, and projected retirement needs. This allows the planning team to determine whether the PRT is appropriate and how it should be structured.

Key to this phase is the Retirement Appraisal, which uses actuarial modeling to calculate how much the client needs to accumulate by retirement age. This tool helps justify the amount of assets held in the trust and can include cash flow projections, asset modeling, and simulations based on life expectancy.

A Multidisciplinary Team Keeps the Trust on Track

A properly maintained PRT requires collaboration among several professionals. This may include the employer or business owner acting as plan sponsor, an independent trustee, an investment advisor, and a third-party administrator or recordkeeper.

This team ensures that the trust is properly administered and that contributions remain aligned with the participant’s income and retirement goals. Ongoing oversight, formal documentation, and regular reviews help protect the plan’s exempt status. A real-world case study shared during the session illustrates how each of these roles contributed to a successful outcome during a challenge.

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Part 4: Private Retirement Trust Funding Basics

What Qualifies as a Retirement Asset

Funding a PRT is a highly strategic process. The law does not prescribe which assets may be used, but it does require that those assets be intended for retirement. That means personal-use property is off the table. Courts have shown a clear preference for business-related and investment-grade assets such as income-producing real estate, closely held business interests, and promissory notes.

Inappropriate contributions, such as boats, jewelry, or a primary residence, can undermine the integrity of the entire plan. Asset selection must align with the retirement modeling and support the participant’s lifestyle projections through retirement age.

Funding Must Reflect Intent and Defensibility
The amount and timing of contributions are just as important as the types of assets used. Large lump-sum contributions made shortly before litigation are often seen as attempts to avoid creditor claims rather than fund retirement. A strong funding plan includes ongoing contributions or a documented Contribution Promise, which helps build the trust over time.

This session also explores advanced strategies, including integrating digital assets and using other trust types such as BDITs to complement the plan. Regardless of the structure, the underlying theme remains the same: credible modeling, clear documentation, and a retirement-first mindset are the hallmarks of a defensible PRT.

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