The Disadvantage of Rabbi Trusts

Rabbi trusts can help higher-earning employees minimize their tax burden. However, rabbi trusts have a significant disadvantage: while rabbi trust funds may be held by a third-party entity, the trust itself is not protected from creditor claims.

If the founding company declares bankruptcy or otherwise becomes insolvent, its creditors will have unbridled access to the rabbi trust’s funds—potentially depriving employees of their own earnings.


Philip J. Kavesh
Nationally recognized attorney helping clients with customized estate planning guidance for over 40 years.