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.
Fairfax Virginia Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — A Rabbi Trust Description: The Fairfax Virginia Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees, also known as a Rabbi Trust, is a specific type of trust established to provide executive employees with a nonqualified deferred compensation plan. This trust is commonly used by organizations and companies to offer additional benefits and incentives to their high-ranking executives. A Rabbi Trust is named after the famous court case involving a Rabbi's salary deferral, which led to the creation of this trust vehicle. It is designed to ensure that deferred compensation is protected in case of unforeseen circumstances like the company's bankruptcy or change in control. By placing assets into this trust, employers can set aside funds that would be paid out to qualifying executives in the future, typically upon retirement or separation from service. This trust arrangement provides several advantages for both employers and executive employees. Firstly, it allows executives to defer a portion of their salary or bonuses, providing potential tax advantages as the funds grow tax-deferred until distribution. Secondly, the trust's structure safeguards the deferred funds from being accessed by the employer, assuring executives that their compensation is secure. Lastly, a Rabbi Trust can offer peace of mind for executives, even in the face of potential financial instability within the company. Within the Fairfax area of Virginia, there may exist different variants of the Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust. These may include variations based on the specific employer and the unique terms and conditions defined within each trust agreement. Some companies may tailor the trust to meet the needs of specific executives or customize it to align with their compensation philosophy. In conclusion, the Fairfax Virginia Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees — a Rabbi Trust is a specialized trust established to provide executive employees with deferred compensation benefits. With its protective structure, tax advantages, and vested interest in executives' long-term financial security, this trust arrangement serves as a valuable tool in attracting and retaining top talent within organizations.
