A method of deferring compensation for executives is the use of a rabbi trust. The instrument was named - rabbit trust - because it was first used to provide deferred compensation for a rabbi. Generally, the Internal Revenue Service (IRS) requires that the funds in a rabbi trust must be subject to the claims of the employer's creditors.
This information is current as of December, 2007, but is subject to change if tax laws or IRS regulations change. Current tax laws should be consulted at the time of the preparation of such a trust.
The Kansas Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees, commonly known as a Rabbi Trust, is a specific type of trust designed to provide executives with additional financial benefits and security. This trust is established by employers in Kansas to set aside funds for executive employees, thus allowing them to defer a portion of their compensation to a future date. The purpose of such a trust is to provide executives with a reliable and dedicated source of income in the future, while also offering potential tax advantages for both the employee and the employer. Kansas Nonqualified Deferred Compensation Trusts for the Benefit of Executive Employees — Rabbi Trusts come in various types, each tailored to specific needs and goals. Some different types of Kansas Rabbi Trusts include: 1. Salary Deferral Trust: This type of trust allows executives to defer a percentage of their salary for a specified period of time, such as until retirement or a predetermined date. 2. Bonus Deferral Trust: An employer can establish this trust to enable executives to defer receiving a portion of their annual bonuses, instead opting to receive them at a later date or upon meeting certain performance objectives. 3. Stock Appreciation Rights Trust: In this case, executives can defer receiving payments based on the appreciation of company stock. This trust is particularly beneficial when a company's stock value is projected to increase in the future. 4. Restricted Stock Unit Trust: Companies may grant restricted stock units to executives, which they can defer into this trust. The trust holds these units until a specified event occurs, such as the executive's retirement or achievement of performance targets. These types of trusts provide executives with flexibility in managing their income, allowing them to defer compensation and potentially benefit from taxes on deferred amounts at a later date. Additionally, these trusts serve as a retention tool for employers, ensuring the retention of their top talent by offering valuable deferred compensation opportunities. It's important to note that the specific terms and conditions of each Kansas Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — Rabbi Trust may vary depending on the employer and individual circumstances. Consulting with an experienced financial advisor or attorney is crucial when considering participation in or establishing such a trust, ensuring compliance with applicable laws and regulations while maximizing the potential benefits for all parties involved.
