Colorado Qualifying Subchapter-S Revocable Trust Agreement
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How to fill out Qualifying Subchapter-S Revocable Trust Agreement?
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FAQ
Trust beneficiaries must pay taxes on income and other distributions that they receive from the trust. Trust beneficiaries don't have to pay taxes on returned principal from the trust's assets. IRS forms K-1 and 1041 are required for filing tax returns that receive trust disbursements.
A qualified revocable trust (QRT) is any trust (or part of a trust) that was treated as owned by a decedent (on that decedent's date of death) by reason of a power to revoke that was exercisable by the decedent (without regard to whether the power was held by the decedent's spouse).
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.
Revocable trusts are the simplest of all trust arrangements from an income tax standpoint. Any income generated by a revocable trust is taxable to the trust's creator (who is often also referred to as a settlor, trustor, or grantor) during the trust creator's lifetime.
If a trust is a grantor trust, then the grantor is treated as the owner of the assets, the trust is disregarded as a separate tax entity, and all income is taxed to the grantor.
A trust can hold stock in an S corp only if it (1) is treated as owned by its grantor for income tax purposes under us grantor trust rules, (2) was a grantor trust immediately before its grantor's death (the trust can be a shareholder only for two years from that date), (3) received stock from the will of a decedent (
Since a revocable trust is not treated as separate from the grantor, it is an eligible S corporation shareholder while the grantor is alive.
The IRS treats all revocable living trusts as disregarded entities. i This means that even though a trust legally owns the taxable property or taxable income, it does not need to file a separate tax return. This is because the IRS disregards the trust entity.
A Revocable Trust does not reduce income taxes, estate taxes, gift taxes, generation skipping taxes or inheritance taxes. In short, Living Trusts provide no tax advantages. If someone is trying to sell you on the idea of forming a Revocable Trust based on tax savings, run away!
Three commonly used types of ongoing trusts qualify as S corporation shareholders: grantor trusts, qualified subchapter S trusts (QSSTs) and electing small business trusts (ESBTs).