A Kentucky Qualifying Subchapter-S Revocable Trust Agreement is a legal document created in accordance with Kentucky state laws that establishes a revocable trust with specific provisions required for eligibility under the Subchapter-S tax classification. This type of trust is designed to provide certain tax advantages while allowing the granter to retain control and flexibility during their lifetime. Keywords: Kentucky, Qualifying Subchapter-S, Revocable Trust Agreement, tax advantages, control, flexibility There are different types of Kentucky Qualifying Subchapter-S Revocable Trust Agreements, each with its own specific characteristics and purposes. Some common types include: 1. Kentucky Irrevocable Subchapter-S Trust Agreement: A subtype of the revocable trust, this agreement cannot be altered or terminated by the granter once it is established. It is often utilized for estate planning purposes to minimize estate taxes and protect assets from creditors. 2. Kentucky Marital Deduction Subchapter-S Trust Agreement: This trust agreement is commonly used by married couples to take advantage of the unlimited marital deduction for estate tax purposes. By establishing this trust, the granter can leave assets to their spouse in a manner that qualifies for the deduction, thereby reducing the potential tax burden. 3. Kentucky Qualified Terminable Interest Property (TIP) Trust Agreement: Often employed in blended families or in situations where the granter wishes to provide for a surviving spouse while maintaining control over the ultimate distribution of assets, this trust allows for the deferral of estate taxes until the death of the surviving spouse. 4. Kentucky Granter Retained Income Trust (GRIT) Agreement: A GRIT agreement enables the granter to transfer assets to the trust, while retaining income from those assets for a specified period. This arrangement allows the granter to minimize gift and estate taxes, as only the present value of the remainder interest is subject to these taxes. 5. Kentucky Charitable Remainder Subchapter-S Trust Agreement: This type of trust agreement allows the granter to donate assets to a charitable organization while retaining an income stream from those assets for a specified period or for life. By doing so, the granter can receive an immediate income tax deduction for the charitable gift, and potentially reduce estate taxes. It is important to consult with a qualified estate planning attorney or financial advisor when considering a Kentucky Qualifying Subchapter-S Revocable Trust Agreement, as the specific provisions and requirements may vary depending on individual circumstances and goals.
Kentucky Qualifying Subchapter-S Revocable Trust Agreement
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Specifically, S corporation shareholders must be individuals, specific trusts and estates, or certain tax-exempt organizations (501(c)(3)). Partnerships, corporations, and nonresident aliens cannot qualify as eligible shareholders.
As an initial matter, as long as the business owner is living, his or her revocable trust is treated as a grantor trust for income tax purposes, and as such, is an eligible S corporation shareholder.
For example, if a trust is a grantor trust to one individual, it is eligible as an S corporation shareholder, even though it is irrevocable (rather than revocable).
Designing a QSSTThe trust must have only one income beneficiary during the life of the current income beneficiary, and that beneficiary must be a U.S. citizen or resident;All of the income of the trust must be (or must be required to be) distributed currently to the one income beneficiary;More items...?
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 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.
Since a revocable trust is not treated as separate from the grantor, it is an eligible S corporation shareholder while the grantor is alive.
An irrevocable grantor trust can own S corporation stock if it meets IRS regulations. The trust must contain language stating that all the ordinary income the trust earns along with the original trust assets are owned by the trust grantor.
The benefit of a QSST from a tax perspective is that the income beneficiary is treated as the deemed owner over the portion of the trust that consists of stock in the S corporation. This means that the trust's allocable portion of the S corporation income is reported directly by the beneficiary.
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.