Interested in training for your team? Click here to learn more

Trusts as S Corporation Shareholders: Elections, Eligibility, and Avoiding Loss of Subchapter S Status

QSSTs, ESBTs, Grantor Trusts, and Testamentary Trusts

Recording of a 110-minute CPE webinar with Q&A

This program is included with the Strafford CPE Pass. Click for more information.
This program is included with the Strafford CPE+ Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Monday, June 10, 2024

Recorded event now available

or call 1-800-926-7926

This course will cover types of trusts eligible to hold S corporation shares, including Qualified Subchapter S Trusts (QSSTs) and Electing Small Business Trusts (ESBTs), making the corresponding QSST and ESBT elections, and avoiding common scenarios where S status is inadvertently terminated when a trust holds shares.

Description

Trusts are viable S corporation shareholders. Grantor trusts, testamentary trusts, QSSTs, and ESBTs, are all eligible to hold S corporation shares. Owning S corporation stock through a trust, or transferring the shares to a trust at death, can be an effective method of transferring ownership. IRC Section 645(b)(2) provides a two-year transition period for certain trusts upon the death of an S corporation shareholder.

A QSST can be an S corporation shareholder. A QSST must meet specific criteria, including having a single income beneficiary and distributing all income currently to the said beneficiary. An ESBT could be a better alternative for owners wanting to distribute or accumulate income to multiple beneficiaries, for example, children. Both QSSTs and ESBTs require timely, properly filed elections. Both are allowed to hold property other than the S corporation stock creating a bifurcated reporting obligation.

There are many circumstances involving trusts that can create the inadvertent termination of the S election. These include leaving S corporation stock to an ineligible shareholder (a foreign trust, IRA, NRA) or even including a defective provision in the trust document. Tax advisers working with S corporations and S corporation shareholders need to recognize the caveats of establishing trusts as shareholders of S corporations for living and testamentary trusts.

Listen as our panel of Subchapter S veterans explains the concerns and considerations of having a trust as an S corporation shareholder.

READ MORE

Outline

  1. Trusts as S corporation shareholders: overview
  2. Trust eligibility
  3. QSSTs
  4. ESBTs
  5. Practical considerations
  6. Avoiding inadvertent terminations of S status

Benefits

The panel will review these and other critical issues:

  • General reporting requirements and bifurcated reporting when a QSST or ESBT holds other assets
  • Properly filing QSST and ESBT elections
  • Eligibility requirements for a QSST and ESBT
  • Trust language to avoid jeopardizing S corporation status

Faculty

DeStefano, John
John F. DeStefano
Of Counsel
Baker & Hostetler

Mr. DeStefano raws on his background in private equity finance and portfolio management at a multibillion-dollar...  |  Read More

Simons, Jana
Jana L. Simons, J.D., LL.M. (Tax), CFP®
Attorney
Meadows Collier Reed Cousins Crouch & Ungerman

Ms. Simons represents individuals and multi-generational families. She primarily focuses on tax planning, drafting...  |  Read More

Weeg, Christopher
Christopher C. Weeg, J.D., LL.M., CPA
Partner
Comiter Singer Baseman & Braun

Mr. Weeg, partner with Comiter Singer, is Board Certified in both Tax Law and in Wills, Trusts and Estates and is also...  |  Read More

Access Anytime, Anywhere

CPE credit is not available on downloads.

CPE On-Demand

See NASBA details.