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.
Title: Mississippi Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust: An In-Depth Overview Keywords: Mississippi, nonqualified deferred compensation trust, executive employees, Rabbi Trust, types Introduction: Mississippi Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees, commonly referred to as a Rabbi Trust, is a specialized financial vehicle designed to provide executive employees with deferred compensation benefits. In this article, we will explore the concept, features, and various types of Mississippi Nonqualified Deferred Compensation Trusts. 1. Overview of the Mississippi Nonqualified Deferred Compensation Trust: A Mississippi Nonqualified Deferred Compensation Trust is established by an employer to set aside funds for executive employees. It allows these employees to defer a portion of their compensation, reducing their immediate tax liability while securing future benefits. 2. Key Features and Purpose: a. Tax-Advantaged: By deferring income into the trust, executives can defer paying income tax on that money until they actually receive it, often at retirement when they are potentially in a lower tax bracket. b. Asset Protection: The trust provides a degree of protection from creditors and ensures that the deferred compensation remains available to the executive employees. c. Control: The company retains ownership and control over the assets in the trust until the deferred amounts are paid out to the employees. d. Investment Options: The trust assets can be invested in various financial instruments, including stocks, bonds, and mutual funds, to potentially grow the fund over time. 3. Types of Mississippi Nonqualified Deferred Compensation Trust: While the basic structure remains the same, there are different types of Mississippi Nonqualified Deferred Compensation Trusts depending on the specific arrangements and characteristics: a. SERP Rabbi Trust: Stands for Supplemental Executive Retirement Plan, which provides additional retirement income beyond standard retirement plans. b. Rabbi Trust with Disability Benefits: Offers disability benefits to executive employees in the event of temporary or permanent disability. c. Rabbi Trust with Survivor Benefits: Designed to provide survivor benefits to the family or beneficiaries of executive employees in the unfortunate event of their death. d. Rabbi Trust with Golden Parachute Clause: Includes special provisions for executives in the event of a corporate merger, acquisition, or change in control, often providing lucrative financial incentives as part of an employment agreement. Conclusion: A Mississippi Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees, also known as a Rabbi Trust, is a highly advantageous financial tool for employers and executive employees. It offers tax advantages, asset protection, and flexibility in structuring compensation packages. Depending on the specific needs and circumstances of the employer and employees, different types of trust arrangements can be established. By leveraging these trusts, businesses can attract and retain top-tier executive talent while providing long-term financial security to their key personnel.
