A California Irrevocable Trust, also known as a Qualifying Subchapter-S Trust (SST), is a legal arrangement created by a granter to protect and manage assets for the benefit of beneficiaries. It is important to note that while this description is specific to California, other states may have similar provisions and regulations for such trusts. An SST must meet certain requirements set forth by the Internal Revenue Code (IRC) to qualify as a Subchapter-S trust. The main purpose of establishing an SST is to allow the trust to hold S-corporation stock without adversely affecting the corporation's S-status. Key features and benefits of a California Irrevocable Trust — Qualifying Subchapter-S Trust: 1. Asset Protection: By placing assets in an irrevocable trust, individuals can shield them from potential future creditors, lawsuits, or other claims. This protection may help secure the beneficiaries' interests. 2. Tax Flexibility: A SST is designed to enjoy the tax benefits of an S-corporation. Unlike other trusts, an SST can hold S-corporation stock without triggering the termination of the corporation's S-status, which allows for pass-through taxation. 3. Control and Preservation of Assets: The granter can retain control over the trust assets during their lifetime, specifying how they are managed and distributed to beneficiaries. This control allows for the preservation and wise management of the assets according to the granter's intentions. 4. Flexibility in Beneficiary Designations: A SST allows the granter to name multiple beneficiaries and define the conditions of distributions. This flexibility ensures that the assets are distributed in accordance with the granter's wishes, even beyond their lifetime. Types of California Irrevocable Trusts — Qualifying Subchapter-S Trusts: 1. Standard SST: This is the most common type of SST in California. It complies with all the requirements outlined in the IRC for a trust to qualify as an SST while holding S-corporation stock. 2. Marital SST: This type of SST is specifically structured to benefit a surviving spouse. It may provide income and support for the spouse while preserving the trust assets for the ultimate beneficiaries designated by the granter. 3. Testamentary SST: This California SST comes into effect upon the death of the granter and is established through a provision in their will. It is intended to hold S-corporation stock assets passed down to the trust after the granter's demise. In conclusion, a California Irrevocable Trust, specifically a Qualifying Subchapter-S Trust (SST), offers a valuable tool for asset protection and efficient management while enjoying the benefits of an S-corporation's tax provisions. With multiple types available, individuals can tailor the trust to their unique needs, ensuring assets are safeguarded and efficiently distributed to their intended beneficiaries.