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

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

Name: King Washington Nonqualified Deferred Compensation Trust for the Benefit of Executive Employees - a Rabbi Trust
Brand: US Legal Forms
Rating: 4.87 (381 reviews)

Category:

Trusts - Rabbi

State:

Multi-State

County:

King

Control #:

US-01178BG

Format:

Instant download

Description

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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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.

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.

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.

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.

Creditors can come after assets: If the company goes bankrupt, the money in a rabbi trust may not be protected from creditors. No tax advantages for employers: Unlike other types of trusts, rabbi trusts provide no tax benefits for employers.

The Rabbi Trust is a non-qualified deferred compensation plan in which funds are invested in an irrevocable trust and held for the benefit of employees for retirement purposes.

Q: Do trusts have a requirement to file federal income tax returns? A: Trusts must file a Form 1041, U.S. Income Tax Return for Estates and Trusts, for each taxable year where the trust has $600 in income or the trust has a non-resident alien as a beneficiary.

Rabbi trusts are so named because the first such trust approved by the IRS in 1980 was established for the benefit of a rabbi. benefits might not be paid when his service to the congregation ended. The congregation proposed to place assets in a trust and restrict their use to the payment of such benefits.

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Nonqualified Deferred Compensation: Section 409A.. 4. Short-Term and Long-Term Investments: Dole sponsors various non-qualified benefit and executive compensation plans, with plan assets held in Rabbi Trusts.

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

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Does a rabbi trust file a tax return?

Are rabbi trusts unfunded?

Is a rabbi trust an asset?

Does a rabbi trust have to file a tax return?

Is a rabbi trust protected from creditors?

Is a rabbi trust a non-qualified deferred compensation?

Do all trusts need to file a tax return?

Why is a rabbi trust called a rabbi trust?

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