Are deferred compensation plans creditor proof?
Posted on Jan 4, 2016 4:20am PST
The short answer is yes. You can defer a significant portion of your compensation
under a non-qualified retirement or deferred compensation plan. Deferred
compensation plans are safe from your own creditors, but not the claims
of your employer’s creditors. So consider this before you invest
in a deferred compensation plan. There are, however, methods for an employer
to lawsuit-proof a deferred compensation plan. For instance, the employer
can hold the deferred compensation funds in an international ‘rabbi’
trust. This trust would then invest in one or more ‘charging order
only entities,’ such as an international LLC to insulate the funds
from the employer’s creditors.