A rabbi trust is a nonqualified deferred compensation plan whereby an employer and an employee agree to defer payment for the employee's services until a specified future date. The rabbi trust features an irrevocable grantor trust that is set up by the employer to hold the contributions set aside for the employee. While this provides the employee some degree of safety that the money will be available when desired, the terms of the trust must be such that they expose the trust assets to the claims of the employer's creditors.
In recent times, the rabbi trust has become popular with dotcom or otherwise venture capital funded companies when they run out of money. Since these types of companies often have so-called golden handcuffs, or systems of payment in stocks or stock options, employees do not wish to leave the company and so must agree to the rabbi trust.