What is the point of a rabbi trust?

A rabbi trust protects employees from a company that is experiencing financial hardship and wants to remove some of the trust's assets to meet its other obligations. For example, an employer cannot withdraw $50,000 from a rabbi trust to pay employee wages.

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Nonqualified Deferred Compensation Trust for the Benefit of Executive...

Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees - a Rabbi Trust

Name: Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees - a Rabbi Trust
Brand: US Legal Forms
Price: 59.00 USD
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Category:

Trusts - Rabbi

State:

Multi-State

Control #:

US-01178BG

Format:

Instant download

Description What Is A Rabbi Trust

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.

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How to fill out Executive Employees File?

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7701 Trust Subtitle FAQ

The rabbi trust is usually irrevocable, although it can be designed to be revocable until the happening of certain events such as a change in control.

Taxation of Rabbi Trusts A rabbi trust is considered a grantor trust for income tax purposes, resulting in trust income taxed to the employer. The trustee is required to file a fiduciary tax return. Contributions to the trust are not tax deductible by the employer.

Rabbi trusts allow employees' assets to grow without them having to pay tax on any gains until they withdraw their money. In this sense, a rabbi trust is similar to a qualified retirement plan. A rabbi trust does not provide any tax benefits for companies that make its use limited compared to other types of trusts.

Rabbi trust is a grantor trust Because the assets of a rabbi trust are subject to an employer's creditors, the trust will be treated as a grantor trust.6 This means that the assets of the trust are treated as assets of the employer for tax purposes.

A rabbi trust is so called because the first such trust was established by a Jewish congregation for its rabbi. The congregation applied for and obtained a private letter ruling (PLR) from the Internal Revenue Service (IRS) which clarified the tax consequences of the establishment of the trust to the rabbi.

A rabbi trust is exempt from most of the Employee Retirement Income Security Act of 1974 (ERISA) as long as it is a top hat plan, which, according to section 201 of ERISA, is an unfunded plan maintained by an employer to provide deferred compensation to a select group of management or highly compensated employees.

A rabbi trust is a grantor trust established by an employer to hold assets to be used in connection with a deferred compensation arrangement. It can be established as a revocable trust or an irrevocable trust.

A rabbi trust protects employees from a company that is experiencing financial hardship and wants to remove some of the trust's assets to meet its other obligations. For example, an employer cannot withdraw $50,000 from a rabbi trust to pay employee wages.

Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees - a Rabbi Trust

Description What Is A Rabbi Trust

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