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 Chicago Illinois Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees, also known as a Rabbi Trust, is a specific type of trust arrangement commonly used by employers to provide supplemental retirement benefits to key executive employees. This trust serves as a supplemental savings tool, allowing executives to defer a portion of their compensation until a specified future date, usually retirement. Keywords: Chicago Illinois, nonqualified deferred compensation trust, executive employees, Rabbi Trust, supplemental retirement benefits, trust arrangement, savings tool, defer compensation, retirement. Different types of Chicago Illinois Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust may include: 1. Revocable Rabbi Trust: This type of trust can be revoked or altered by the employer since the assets in the trust remain the property of the company until distributed to the executives. It provides more flexibility to the employer in managing the trust. 2. Irrevocable Rabbi Trust: As opposed to a revocable trust, this type of trust cannot be altered or revoked by the employer after it has been established. It provides executives with greater security, as the assets within the trust are legally separated from the employer's control. 3. Secured Rabbi Trust: A secured trust places the assets in the trust separate from the employer's general assets. This type of trust ensures that the executives' deferred compensation remains protected even in the event of the employer's bankruptcy or financial difficulties. 4. Non-Secured Rabbi Trust: In contrast, a non-secured trust does not provide the same level of asset protection. The deferred compensation remains part of the employer's general assets and may be subject to the claims of the company's creditors. 5. Granter Trust: A granter trust is a type of trust where the employer remains the owner of the assets in the trust for tax purposes. This allows the employer to retain control over the income tax obligations associated with the trust's assets. 6. Non-Grantor Trust: A non-grantor trust is one where the employer relinquishes ownership of the trust's assets for tax purposes. This means that the trust itself becomes responsible for income tax obligations. It is important for employers and executive employees to carefully consider the specific type of Chicago Illinois Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust that best aligns with their financial goals, risk tolerance, and legal requirements. Consulting with legal and financial professionals experienced in trust planning is highly recommended ensuring compliance and maximize the benefits of this type of trust arrangement.
