A Massachusetts Qualified Subchapter-S Trust for the Benefit of a Child with a Crummy Trust Agreement is a specialized legal arrangement designed to provide certain tax advantages and facilitate the seamless transfer of assets to a child. This type of trust combines the benefits of a Qualified Subchapter-S Trust (SST) and a Crummy Trust specifically tailored to comply with Massachusetts state laws. An SST is a trust formed in accordance with the provisions set forth in Subchapter S of the Internal Revenue Code. It allows a shareholder to create a trust with certain tax benefits, primarily the ability to pass on income and tax liabilities to the trust's beneficiaries (in this case, a child), rather than taxing them at the trust level. This arrangement ensures that the child, as the ultimate beneficiary, is responsible for reporting and paying the applicable taxes. A Crummy Trust, on the other hand, takes its name from the landmark court case Crummy v. Commissioner. It allows the trust's beneficiaries to receive gifts from the trust, typically in the form of contributions, which qualify for the annual gift tax exclusion. Without this provision, gifts made to the trust would be subject to gift taxes. By incorporating the Crummy power, the creator of the trust can take advantage of the gift tax exemption and efficiently transfer assets. In Massachusetts, a Qualified Subchapter-S Trust for the Benefit of a Child with a Crummy Trust Agreement may have different variations based on the specific needs and preferences of the granter (the person establishing the trust) and the intended beneficiaries. These variations may include: 1. Lifetime-QSST with Crummy Trust: This type of trust allows the granter to transfer assets during their lifetime, while maintaining the tax advantages associated with an SST. It ensures that the child receives the benefits of the trust while still providing flexibility to the granter in terms of managing and distributing the assets. 2. Testamentary SST with Crummy Trust: This variation is established through a bequest in the granter's will. It becomes effective upon the granter's death and allows for the seamless transfer of assets to the child beneficiary. The Crummy Trust provision still applies, allowing for the gift tax exclusion. 3. Irrevocable SST with Crummy Trust: This type of trust cannot be altered or revoked once created, providing a level of protection for the assets. It offers the granter long-term tax advantages and control over the distribution of assets to the child beneficiary, subject to the Crummy power restrictions. In summary, a Massachusetts Qualified Subchapter-S Trust for the Benefit of a Child with a Crummy Trust Agreement combines the tax benefits of an SST with the gift tax exclusion opportunities provided by a Crummy Trust. By incorporating these provisions into the trust agreement, the granter can ensure efficient asset transfer to a child beneficiary while minimizing the tax implications.
Massachusetts Qualified Subchapter-S Trust for Benefit of Child with Crummey Trust Agreement
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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.
Net investment income tax of a QSST 1411(a)(2)). The tax also applies to QSSTs to the extent the net investment income is retained in the trust. Although the S corporation income of a QSST is taxed to the individual income beneficiary, capital gain on the sale of the S corporation stock is taxed at the trust level.
grantor trust is any trust that is not a grantor trust. How they're taxed. As a separate tax entity, a nongrantor trust is required to have its own TIN . Nongrantor trusts must pay taxes on income received, which is typically at much higher rates than for individuals.
Every executor, administrator, trustee, guardian, conservator, trustee in a noncorporate bankruptcy or receiver of a trust or estate that received in- come in excess of $100 that is taxable under MGL ch 62 at the entity level or to a beneficiary(ies) and that is subject to Massachusetts jurisdiction must file a Form 2.
Grantor Trusts If a trust is considered a grantor trust for income tax purposes, all items of income, deduction and credit are not taxed at the trust level, but rather are reported on the personal income tax return of the individual who is considered the grantor of the trust for income tax purposes.
If the proper criteria are met during your lifetime, upon your death, the trust assets will not be included in your estate for estate tax purposes. The beneficiaries of the trust will not have to pay income taxes on the life insurance proceeds that they ultimately receive.
A Crummey trust with one benefi- ciary may be drafted to qualify for the GST annual exclusion, but a Crummey trust with more than one beneficiary does not satisfy the above requirements (although transfers to it, may, in part, qualify for the gift tax annual exclusion).
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.
A QSST is one of several types of trusts that are eligible to hold stock in an S corporation. Its two primary requirements are (1) there can be only one beneficiary of the trust and (2) all income must be distributed at least annually (Sec.
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.