Completing the Series with a Critical Element
In the fourth and final installment of Peak Trust Company’s Private Retirement Trust (PRT) Series, exemption planning attorney Dustin Nichols returns to address one of the most technical—and misunderstood—aspects of PRT implementation: funding. While previous sessions explored structure, strategy, and legal foundation, this closing chapter focuses on what goes into the trust, why it matters, and how to do it right.
As Dustin puts it, “We’re putting a dot on the ‘i’ and a cross on the ‘t.’” It’s a deep dive into asset selection, statutory guardrails, funding logistics, and risk mitigation—all anchored by the principle that a PRT must be principally and primarily designed and used for retirement.
Substance Over Symbolism: What Qualifies as a Retirement Asset
At the heart of this session is a guiding test: Does this asset contribute to funding retirement benefits? If not, it doesn’t belong in a PRT.
Nichols outlines a clear distinction between appropriate and inappropriate contributions. Income-producing assets like commercial property, business interests, investment portfolios, promissory notes, and well-structured life insurance meet the bar. Personal-use assets like primary residences, boats, jewelry, or cars, no matter how valuable, are not appropriate assets.
Importantly, Dustin underscores that recharacterization alone is not enough. The planning must be backed by real, actuarially sound analysis and a defensible retirement story, especially when the PRT is tested in litigation or challenged in bankruptcy proceedings.
The Retirement Appraisal: Building the ‘Why’ Behind the What
Funding a PRT is not just about identifying available assets, it’s about justifying their inclusion with precision. To do that, Dustin walks through the Retirement Appraisal: a detailed analysis that integrates actuarial projections with exemption diagnostics, tailored lifestyle modeling, and long-term income needs.
Factors such as projected retirement age, life expectancy, income replacement needs, asset growth, and inflation adjustments are all considered. “It’s about proving up the need,” Dustin explains, noting that well-prepared documentation not only supports the exemption but also fortifies the structure against creditor scrutiny.
How Much Is Too Much? Understanding the Limits of Protection
A common misconception is that more is better. But overfunding a PRT, especially in the absence of long-term planning, can lead to diluted protection or outright loss of exemption. Referencing key case law like Barnes and Rucker, Dustin explains why courts disfavor lump-sum conversions or excessive contributions unsupported by income or lifestyle projections.
Instead, he emphasizes a two-fold funding strategy: a modest seed contribution, followed by a Contribution Promise, a structured commitment to make ongoing contributions over time. Not only does this satisfy the definition of a “plan” under the statute, it can be used to secure protection over otherwise exposed equity in assets like a primary residence.
Digital Assets, Business Equity, and Advanced Integration
The session also acknowledges modern asset classes. Dustin introduces the concept of a “Digital Wallet PRT,” incorporating cryptocurrencies and requiring a co-trustee structure to ensure security and traceability.
He also walks through the integration of PRTs with estate planning techniques, specifically, how promissory notes from installment sales to defective grantor trusts (e.g., BDITs) can be repositioned into the PRT to secure retirement cash flow. A compelling case study shows how a client with $88 million in net worth could shift from 3% protected assets to 73% protected by layering PRTs with gifting strategies.
Bringing It All Together
This final session reinforces the series’ overarching message: a Private Retirement Trust is not a one-size-fits-all solution. It’s a technical, highly customizable planning tool that, when used correctly, offers unparalleled asset protection under California law.
By walking through practical funding mechanics, sample reports, exemption thresholds, and statutory nuances, Dustin equips attorneys, CPAs, and business owners with the clarity to move forward confidently. As he concludes, “Not everything belongs in a PRT. But if done right, the assets that do can make all the difference.”