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.
A New Mexico Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees, also known as a Rabbi Trust, is a specialized trust specifically designed for high-level executives to defer their income and receive benefits upon retirement or separation from the company. This type of trust provides executives with a financial vehicle to defer compensation and potentially minimize their current tax liabilities. The Rabbi Trust is governed by the laws of New Mexico, and its main purpose is to secure promised compensation for executives by holding assets in trust for their benefit. By utilizing this trust, employers can provide executives with a reliable means to defer a portion of their salary or bonuses, allowing for long-term investment and growth potential. One key feature of a New Mexico Nonqualified Deferred Compensation Trust is the flexibility it offers to participants. The trust allows executives to defer a portion of their compensation while still being able to choose the investment options for their deferred funds. This provides executives with the opportunity to invest their deferred income in a way that aligns with their financial goals and risk tolerance. Another feature of this type of trust is that it typically provides protection to executives by segregating the trust assets from the employer's general assets. This segregation helps safeguard the deferred compensation from the employer's creditors, ensuring that executives receive their promised benefits even in the event of a financial setback or bankruptcy. There may be different variations or subtypes of New Mexico Nonqualified Deferred Compensation Trusts for the Benefit of Executive Employees — a Rabbi Trust, depending on the specific provisions and features agreed upon between the employer and the executive. These variations could include options such as vesting schedules, earnings crediting methods, and distribution options, providing additional customization to meet the unique needs of both the executive and the employer. In summary, a New Mexico Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust is a specialized trust designed to help high-level executives defer a portion of their compensation and receive benefits upon retirement or separation. It offers flexibility in investment choices, protection of assets, and customization options to suit the specific needs of the executive and the employer.
