Kentucky Qualified Subchapter-S Trust for Benefit of Child with Crummey Trust Agreement
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How to fill out Qualified Subchapter-S Trust For Benefit Of Child With Crummey Trust Agreement?
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FAQ
An electing small business trust (ESBT) within the meaning of section 1361(e) is treated as two separate trusts for purposes of chapter 1 of the Internal Revenue Code. The portion of an ESBT that consists of stock in one or more S corporations is treated as one trust.
A beneficiary will normally be a natural person, but it is perfectly possible to have a company as the beneficiary of a trust, and this often happens in sophisticated commercial transaction structures.
The main difference between an ESBT and a QSST is that an ESBT may have multiple income beneficiaries, and the trust does not have to distribute all income. Unlike with the QSST, the trustee, rather than the beneficiary, must make the election.
However, in an S Corporation when the owner dies, the shareholder heirs only receive a step-up of basis in the corporate stock equal to the fair market value of the company at the date of death.
678 trust (because the surviving spouse does not own the corpus). A QTIP trust can be drafted, however, to meet the QSST requirements. Both the QSST and the QTIP trust require the current distribution of all income to the surviving spouse as the current income beneficiary.
Testamentary trusts. This trust type is established by your will. It's an eligible S corporation shareholder for up to two years after the transfer and then must either distribute the stock to an eligible shareholder or qualify as a QSST or ESBT.
The QSST may be useful for estate planning purposes. It may also be useful for holding S stock for the benefit of a minor or incompetent. Individuals, estates, and certain trusts are subject to a net investment income tax, which is an additional tax of 3.8%.
A Qualified Subchapter S Trust, commonly referred to as a QSST Election, or a Q-Sub election, is a Qualified Subchapter S Subsidiary Election made on behalf of a trust that retains ownership as the shareholder of an S corporation, a corporation in the United States which votes to be taxed.
Since a revocable trust is not treated as separate from the grantor, it is an eligible S corporation shareholder while the grantor is alive.
Thus, if a grantor wants to leave S corp stock to a trust for her family members after her death without terminating the company's election, the trust must qualify either as an electing small business trust (ESBT) or as a qualified subchapter s trust (QSST).
