Separate Trust Under this scenario, the subtrust would elect QSST status, while the original trust could continue to be a complex trust. Each separate trust (or subtrust) would need to have a separate employer identification number and file a separate income tax return (Regs.
Can a QSST have multiple beneficiaries?
A QSST can have one or more successive income beneficiaries. However, naming one or more successive income beneficiaries risks the company’s S status because each successive income beneficiary is permitted to affirmatively refuse to consent to the original QSST election (Regs. Sec.
Is a QSST irrevocable?
The two-year limitation for S corporations to have as a shareholder either a testamentary trust or living trust that becomes irrevocable can be avoided by electing to convert the trust to a Qualified Subchapter S Trust, commonly referred to as a QSST.
Can an irrevocable trust be a QSST?
To qualify as an ESBT status, the trust beneficiaries must be limited to individuals, estates and charitable organizations; no beneficiary can purchase an interest in the trust; and the trust is not a QSST, exempt from tax or other specialized trusts.
Who are the beneficiaries of a qualified QSST?
A QSST must be structured to distribute all current income to a beneficiary who is a US citizen. There can be only one income beneficiary during the life of the beneficiary and the corpus must be distributed to the current income beneficiary only.
What happens when a trust ceases to be a QSST?
When this occurs, the trust would cease to be a QSST because it would have more than one current income beneficiary. This would lead to loss of S status for the corporation because a trust with two income beneficiaries is not an eligible shareholder.
How are qssts different from other S corporation trusts?
QSSTs are different than other other S corporation trusts in that the beneficiary is usually someone other than the grantor of their estate. Grantors/shareholders can use the QSST to make a gift of all or part of S corporation stock and retain voting power while the beneficiary receives the income.
Can a grantor use a qualified Subchapter’s Trust?
Qualified subchapter S trusts. (Estates & Trusts) Grantors/shareholders can use the QSST to make a gift of all or part of S corporation stock and retain voting power while the beneficiary receives the income. A QSST must be structured to distribute all current income to a beneficiary who is a US citizen.
