Deferred Compensation is another Executive Benefit Plan that, if properly established and maintained, may provide excellent long-term advantages.
These plans are primary established as a method to "defer" current income to a future point in time, typically at retirement.
Like the 162 Executive Bonus plan, a Deferred Compensation plan must be used under a "C" corporation arrangement.
Where they differ is the Deferred Compensation plan is a contractual agreement between the employee and the employer whereby the employer promises to pay future income benefits to the employee for services yet to be rendered.
Given the fact that this is a basically a "promise" by the corporation to pay income benefits well into the future, there could be a substantial risk of forfeiture.
As with most Executive Benefit Plans, a cash rich life insurance policy serves as the funding tool.
The dollars which fund the policy come from the corporate coffers and are not tax deductible to the corporation, nor are they taxable to the key employee.
However, when the deferred compensation is distributed, it then becomes tax deductible to the corporation and reportable as income to the executive.
During the agreement, the corporation retains all rights of ownership over the policy and names itself as the beneficiary. Over time, the policy builds tax-deferred value and a tax-free insurance benefit. Eventually, this tax-deferred build up will serve as the source for the deferred income proceeds.
Action To Take
Click HERE to obtain Deferred Compensation information
For Faster Service Call 1-800-480-7526
Copyright © 1998
Fielder Financial Management, LTD.
All Rights Reserved.
Securities offered through Fortune Financial Services, Inc. member FINRA, SIPC. Fielder Financial Management, Ltd. not affiliated with Fortune Financial Services, Inc. Mark Fielder, Financial Professional, CA. Insurance Lic. # 0690576.