Qualified Subchapter S Trust Form With Two Points
Description
How to fill out Irrevocable Trust Which Is A Qualifying Subchapter-S Trust?
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FAQ
A trust is eligible to convert from a QSST to an ESBT if it meets the following requirements: (1) The trust meets all of the requirements to be an ESBT under § 1361(e), except for the requirement under § 1361(e)(1)(B) that the trust not have a QSST election in place under § 1361(d)(2).
To qualify as a QSST, the trust must require that all of the net income be distributed to a single beneficiary. While principal of the QSST may also be distributed to the beneficiary in the discretion of the Trustee, the QSST cannot provide for multiple beneficiaries.
A QSST is a trust with a single income beneficiary who makes an election (which can only be revoked with IRS consent) to be treated as the deemed owner (Sec. 1361(d)(3)).
To qualify, the QSST income beneficiary must make a proper and timely election, and the trust must distribute all income to a single individual beneficiary who is a U.S. citizen or resident. If the trust also distributes corpus, it must be allocated to the same income beneficiary.
Therefore, with an ESBT, income can be left in the trust to accumulate. With a QSST, the trust corpus must be distributed only to the income beneficiary during that beneficiary's life or on termination of the trust if prior to the death of the income beneficiary.