Rhode Island Irrevocable Trust — A Detailed Description of Qualifying Subchapter-S Trusts A Rhode Island Irrevocable Trust is a legal entity that allows individuals to transfer or hold their assets, including real estate, investments, or business interests, for the benefit of themselves or their chosen beneficiaries. These trusts are designed to provide various tax benefits while allowing the granter to maintain control over their assets. A specific type of Rhode Island Irrevocable Trust is the Qualifying Subchapter-S Trust (SST). An SST is a trust established under Subchapter S of the Internal Revenue Code (IRC) that allows the trust's income to flow through to the beneficiaries, effectively bypassing double taxation. Costs are commonly used for small businesses, family-owned corporations, or for estate planning purposes. Keywords: Rhode Island, Irrevocable Trust, Qualifying Subchapter-S Trust, assets, tax benefits, granter, beneficiaries, Subchapter S, Internal Revenue Code, income, double taxation, small businesses, family-owned corporations, estate planning. Other notable types of Rhode Island Irrevocable Trusts include: 1. Rhode Island Charitable Remainder Trust: This type of trust allows individuals to donate assets to a charitable organization while retaining income from those assets for a specified period or their lifetime. Upon termination of the trust, the remaining assets are then passed on to the designated charity. 2. Rhode Island Special Needs Trust: Also known as a Supplemental Needs Trust, this trust is designed to benefit individuals with disabilities without affecting their eligibility for government assistance programs such as Medicaid. It allows the trustee to provide supplemental support and resources for the beneficiary's needs beyond what is provided by these public programs. 3. Rhode Island Irrevocable Life Insurance Trust: This trust is specifically created to own and manage life insurance policies. It is an effective tool for preserving the value of life insurance proceeds and removing them from the granter's taxable estate, ensuring financial security for their beneficiaries. 4. Rhode Island Granter Retained Annuity Trust: This trust allows individuals to transfer assets, such as a family business or real estate, to beneficiaries while retaining an income stream from those assets for a predetermined period. It is a popular estate planning tool for minimizing gift and estate taxes. 5. Rhode Island Dynasty Trust: The Dynasty Trust is designed to perpetually benefit multiple generations of a family. It allows for the transfer of substantial wealth to future generations while avoiding gift and estate taxes. This trust ensures long-term financial security and asset protection for the granter's descendants. Rhode Island offers several options when it comes to establishing an Irrevocable Trust, catering to the specific needs and goals of individuals, families, and businesses. It is important to consult with a qualified estate planning attorney or financial advisor to determine the most suitable trust structure based on individual circumstances.
Rhode Island Irrevocable Trust which is a Qualifying Subchapter-S Trust
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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.
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.
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.
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.
Four eligible trust typesGrantor trusts. An important caveat is that these trusts must have one deemed owner who is a U.S. citizen or resident and meet certain other requirements.Testamentary trusts. This trust type is established by your will.QSSTs.ESBTs.
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).
Irrevocable trusts are often set up as grantor trusts, which simply means that they are not recognized for income tax purposes (all of the income tax attributes of the trust, such as income, loss, gains, etc. is passed on to the grantor of the trust).
Background. 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. 1361(d)(3)(B)).
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.
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.
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