Restricted Property Trust

The Restricted Property Trust (RPT), designed by the financial industry legend, Ken Crabb, is an innovative, non-qualified employer-sponsored benefit plan that allows business owners to achieve significant tax efficiency while building long-term wealth in a conservative manner. This strategy enables businesses to make substantial pre-tax contributions that are fully deductible at the corporate level. It combines the power of tax-deductible funding with the stability of a conservative financial vehicle — funded through a specially designed whole life insurance policy inside the trust structure.

Key Tax Advantages

Immediate Tax Deduction

The business receives a 100% current-year tax deduction on contributions, while the participant recognizes only a portion (typically 30%) as taxable income. This creates a substantial net tax savings at the entity level.

Tax-Deferred Growth

Assets inside the Restricted Property Trust grow on a tax-deferred basis, allowing compound growth without annual taxation.

Tax-Advantaged Access

Future distributions can often be structured for favorable tax treatment, providing efficient retirement or supplemental income.

Strategic Use in Business

Financial Rewards for Key Employees

Serves as a powerful, selective incentive tool to recruit, retain, and reward key executives or employees (with flexibility in plan design and participation)

Retirement Income

Build a supplemental retirement income stream that can be accessed in a tax-efficient manner.

Leverage for Future Estate Planning

Create a valuable asset that can be integrated into broader legacy and estate strategies, helping transfer wealth efficiently to the next generation.

Case Study: Leveraging a Restricted Property Trust

The Situation

Our clients, a husband and wife, were successful business owners looking for a tax-efficient way to set aside substantial capital, reward themselves as key participants, and create a powerful asset for the future. They wanted immediate tax benefits at the corporate level without sacrificing control or long-term flexibility. They owned multiple businesses and had already fully funded their pension plan.

The Strategy

Working with our team, each client implemented a Restricted Property Trust funded with a specially designed whole life insurance policy. Over a 10-year funding period, each participant contributed $300,000 per year — for a combined total of $6,000,000. Thanks to the structure of the RPT:

Business received a 100% current-year tax deduction on the full contribution amount.
Participants recognized only $90,000 as taxable income per year over the 10-year period.
Trust holding the policy is immune to creditors or debt collectors during the funding period.
Participants were able to name their beneficiary.

This resulted in substantial net tax savings at the corporate level while building significant cash value inside the policy on a tax-deferred basis.

The Results

By the end of the 10-year funding period, our clients had a combined death benefit of approximately $16 million, a cash value of over $6.5 million, and a tax savings of $2.1 million with money that would have otherwise been lost to the government. At that point, they had two strong options:

Let the policies mature, then take $360,000 per year in tax-advantaged income for 20 years (starting after the policy’s 15th year), or
Retain the policies and leverage the substantial death benefits as part of a comprehensive estate plan.

Our clients chose the second path — using the RPT-funded whole life policy to strengthen their estate plan and create a lasting legacy for the next generation. To see how this strategy continues into their broader estate and legacy planning, visit our Estate Planning section.

Why This Strategy Worked

The Restricted Property Trust allowed these clients to:

Convert taxable dollars into a deductible business expense
Build conservative, tax-deferred cash value inside a whole life policy
Create a flexible, high-value asset that supports both retirement income potential and estate planning goals

This case demonstrates how the RPT can deliver immediate tax advantages while positioning business owners for long-term financial success and legacy creation. To see part 2 of the case study where the policy is leveraged to create a comprehensive estate plan, click the link below.