Private Retirement Trusts and the Power of Purpose
What makes a Private Retirement Trust (PRT) legally defensible? In the second session of our four-part PRT Series, attorney Dustin I. Nichols challenges planners, professionals, and business owners to go beyond documentation and dig into what really matters: intent.
While Part 1 focused on the structure and statutory mechanics of PRTs, this installment shifts the conversation to something even more foundational, how the purpose behind the trust determines whether it stands or falls when tested in court.
Retirement Is Not Just a Label
“Retirement purpose” may sound like boilerplate legal language. But under California Code of Civil Procedure § 704.115, that phrase is everything. It’s the hinge on which exemption eligibility swings—and courts are increasingly scrutinizing whether a trust was created in good faith to provide for retirement or hastily assembled to shield assets from legal exposure.
Using key case law—In re Bloom, Stern, Rucker, Barnes, and others, Dustin walks through real outcomes that illustrate the difference between a plan rooted in legitimate retirement goals and one that was treated like a last-minute firewall.
The message is clear: judges don’t look at what you said; they look at what you did.
From Strategy to Scrutiny
Every case tells a story, and in these stories, courts look for patterns. Was the trust funded before or after a creditor issue arose? Is the contribution aligned with actual retirement modeling? Was there a third-party trustee? Did the client make regular contributions—or just one conveniently timed deposit?
PRTs are not bulletproof by default. They become defensible through discipline, timing, and transparency.
As Dustin explains, clients often want to treat retirement plans like armor. But a better metaphor is a seed: it must be planted early, tended consistently, and grown with care. Trying to grow a tree during a storm won’t fool anyone, least of all a judge.
A Legal Framework for Building PRT’s
So what makes a PRT credible in the eyes of the court? According to Dustin, it’s not just the paperwork. It’s the entire ecosystem of planning, from retirement appraisals and solvency reviews to third-party oversight and real retirement objectives.
A well-administered PRT becomes more than an asset shelter. It becomes a comprehensive retirement planning tool with built-in protection. But without a credible retirement narrative, it risks being dismissed as a fraudulent conveyance cloaked in legal formality.
PRT’s Requires Purpose
This session isn’t just about technical compliance, it’s about mindset. It reminds practitioners that legal strength begins with genuine purpose. A strong PRT plan doesn’t mimic retirement; it reflects it. It’s proactive, structured, and supportable in both planning meetings and court proceedings.
As Dustin puts it, “The courts will protect what they believe is real.” And what’s real is a client who planned early, contributed consistently, and treated their PRT like the retirement tool it was always intended to be.
Continuing the Series
In Part 3, the series shifts from legal theory to practical implementation, guiding professionals through the step-by-step process of building and maintaining a compliant PRT structure.
Stay tuned to explore how planning purpose becomes planning action.