Irrevocable Trusts and Rabbi Trusts

Irrevocable Trust

Features & Use
Permanently transfers assets and their subsequent appreciation to heirs.

Advantages
Estate and income tax benefits
Avoids probate

Disadvantages
Surrenders assets and the right to change trust terms.
Possible gift taxes.
Gains on assets sold within two years taxed at donor rates.

Rabbi Trust

Features & Use
Non-qualified deferred compensation. Benefits can be protected against change of management by the employer.

Advantages
Employee's income can be deferred and invested for gain.

Disadvantages
Deferred compensation assets can be paid to employer's creditors if employer becomes insolvent.