Definition for: Rabbi Trust
A "Rabbi Trust" is a method of deferring compensation for executive employees. The Rabbi Trust is type of nonqualified deferred compensation arrangement in which amounts are transferred to an irrevocable trust for the benefit of the employee. If probably structured, the executive is not taxed on the deferred amount until payments are actually distributed from the trust to the executive. Rabbi Trusts are used as a way to supplement an executive's retirement plan. The term "Rabbi Trust" was coined due to the fact that the first initial ruling by the IRS on the use of such a trust was in connection with a plan set up by a synagogue for a rabbi.
